Economic Value Added

Economic Value Added (EVA) is a determine of a company’s financial performance based on the enduring wealth calculated by deducting cost of capital from its operating earnings adjusted for taxes on a cash basis. Also referred to as “financial profit”. The principle for calculating EVA is as follows: = Net Operating Profit After Taxes (NOPAT) – (Capital * Cost of Capital). In corporate finance, Economic Value Added, is an approximation of a firm’s economic turnover – being the value created in surplus of the required return of the company’s investors.