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Working capital management Cash conversion cycle Return on capital Economic value added Just In Time (business) Economic order quantity Discounts and allowances Factoring (finance)

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Economic Value Added (EVA) is an estimate of true economic profit after making corrective adjustments to GAAP accounting, including deducting the opportunity cost of equity capital. EVA can be measured as Net Operating Profit After Taxes(or NOPAT)less the cost of capital, equity as well as debt. The concept of Economic Profit is closely linked to EVA. However, Economic Profit is not adjusted.

The underlying concept was first introduced by Eugen Schmalenbach, and the current theory was formulated by Bennett Stewart and Joel M. Stern.

Contents 1 Stern Stewart & Company 2 Calculating EVA 3 Other Measures of Shareholder value 4 See also 5 References 6 External links

Stern Stewart & Company owns a registered trademark for EVA™ for a brand of software and financial consulting/training services. The proprietary component of what Stern Stewart & Co. does is the adjustments. The amortisation of goodwill or capitalisation of brand advertising and other similar adjustments are the translations that occur to Economic Profit to make it EVA.

In the field of corporate finance, economic value added is a way to determine the value created, above the required return, for the shareholders of a company.

The basic formula is:

where

, called the return on capital employed (ROCE)

is the firm's return on capital, NOPAT is the Net Operating Profit After Tax, c is the Weighted Average Cost of Capital (WACC) and K is capital employed.

Shareholders of the company will receive a positive value added when the return from the capital employed in the business operations is greater than the cost of that capital; see Working capital management. Any value obtained by employees of the company or by product users is not included in the calculations.

• Added Value
• Market value added

• Value added
• Free cash flow
• Weighted average cost of capital

• G. Bennett Stewart III. The Quest for Value. HarperCollins. 

• Stephan Hostettler, Hermann Stern. Das Value Cockpit. Wiley. 

• Economic Value Added from Stern Stewart & Company
• Economic Value Added from EVA Dimensions LLC
• Economic Value Added (EVA), Prof. Aswath Damodaran
• EVA valuation tutorial from valuatum.com
• Understanding Economic Value Added, investopedia.com
• All About EVA, investopedia.com
• Economic Value Added: A simulation analysis of the trendy, owner-oriented management tool, Timo Salmi and Ilkka Virtanen, 2001