Commonly shortened to EVA. This figure is the difference between the Return on Capital Employed by a company and the Cost of Capital Employed by a company. A simple, but flawed, analogy is to compare the annual cost of your mortgage with the annual increase in value of your house. If your house has risen in value by 10% and your mortgage is only costing 6%, then you are ahead. The same logic applies with a company. If it gets more out of its capital than it is paying for it then it is adding value.

A residual income measure that subtracts the cost of capital from the net operating profits after taxes (NOPAT). It is the financial performance measure most closely linked to shareholder value and the cornerstone for a financial management and incentive compensation system that makes managers think and act like owners.

Profit after tax adjusted for distortions in operating performance (such as goodwill, extraordinary losses, and operating leases) less a charge for the amount of capital employed to create that profit (calculated from the adjusted book value of net assets times the company's weighted average cost of capital). (Stern Stewart)

TM(EVA) A financial management system developed and trademarked by Stern Stewart & Co. EVA is calculated as net operating profit after taxes (NOPAT) less the cost of capital, plus capital budgeting adjustments.

Value added to shareholders by management during a given year.

measures the difference between the return on a companies capital and the cost of that capital. A positive EVA indicates that value has been created for shareholders; a negative EVA signifies value destruction.

A financial performance measure used to evaluate a company's true profit and the creation of wealth for shareholders.

The after-tax cash flow generated by a business minus the cost of the capital it has deployed to generate that cash flow. Representing real profit versus paper profit, EVA underlies shareholder value. Using EVA as a lens, it is possible to determine that despite an increase in earnings, a firm may be destroying shareholder value if the cost of capital associated with new investments is sufficiently high.

EVA describes a value margin (key figure) that is multiplied with the capital a company invests during a defined period.

A measure of financial performance calculated by taking net operating income and subtracting a charge for the capital used to produce that income (EVA = net operating income - capital charge).

growth in economic profit from year to year.

Developed by Stern Stewart. Another measurement tool related to the return on capital employed.

This is a value-based metric that is becoming popular with many companies. EVA is an integrated framework for performance measurement, value-based planning and incentive compensation developed by Stern Steward founders Joel Stern and G. Bennett Steward III. EVA is calculated by taking operation profits and deducting a charge for the cost of capital. Companies that have adopted EVA have frequently realized long-lasting improvements in operating efficiency, growth, morale, motivation and stock market value.

A measurement of shareholder wealth created by an investment center. A trademark of Stern Stewart & Company, calculating EVA can be very complex but is basically net operating profit after taxes (NOPAT) minus an appropriate charge for the opportunity cost of all capital invested in an enterprise.

EVA is a measure of surplus value created on an investment. EVA = (Return on Investment – Cost of Capital) multiplied by (Capital Invested in a Project) or EVA = NOPAT - Capital Charge (See NOPAT and Capital Charge).

EVA represents the economic value of the firm and is computed by subtracting the firm's cost of capital (in monetary terms) from the firm's adjusted operating profit (NOPAT). Positive levels of EVA indicate that the management has been adding value through previous investments.= NOPAT - (WACC)(CAPITAL) where NOPAT = EBIT (1-tax rate)

Net operating profit after taxes minus (capital x cost of capital). EVA is a measure of the economic value of an investment or project.

A measurement of shareholder value as a company’s operating profits after tax, less an appropriate charge for the capital used in creating the profits.

Simply stated, it is the difference between return on capital employed (ROCE) and the weighted average cost of capital (WACC). It gives the difference between the cost of funds of the company and the return it earns on it.

In managerial accounting, the net operating profit earned above the cost of capital for a profit center.

A firm's net operating profit after the cost of capital is deducted.

The value added to or subtracted from shareholder value during the life of a project.

Economic Value Added (EVA) is often defined as the value of an activity that is left over after subtracting from it the cost of executing that activity and the cost of having lost the opportunity of investing consumed resources in an alternative activity. In business terms, one could calculate EVA as Income from Operations - rate of interest in sovereign debt, if sovereign debt can be considered an alternative opportunity to invest working capital and equity. The concept of Economic Profit is closely linked to EVA.