Glossary
Economic Value Added (EVA)
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Economic Value Added (EVA) goes beyond traditional profit measures. It estimates a company’s true economic profit by subtracting the cost of capital from its operating profit. The cost of capital reflects the minimum return investors expect for financing the company. A positive EVA indicates the company is creating value by generating returns that exceed the cost of its capital. A negative EVA suggests the company is destroying value and needs to improve its financial performance.