What is Economic value added?


2 Answer(s)


EVA is a tool to gauge how the company is performing economically. The income statement and balance sheet are the 2 component for calculating EVA. It's automates the way we perceive both balance sheet and income statement.

A measure of a company's financial performance based on the residual wealth calculated by deducting cost of capital from its operating profit (adjusted for taxes on a cash basis). (Also referred to as "economic profit".)
It is related to the Income statement.
The formula for EVA is:

EVA = Net Operating Profit After Tax - (Capital Invested x WACC)

As shown in the formula, there are three components necessary to solve EVA: net operating profit after tax (NOPAT), invested capital, and the weighted average cost of capital (WACC) operating profit after taxes (NOPAT) can be calculated, but can usually be easily found on the corporation's income statement.