Economic value added
Profit above the charge for all the capital used: what the business earned after settling with both lenders and shareholders.
Formula
EVA = NOPAT - IC \times WACCOperating profit after tax, invested capital, and the weighted average cost of capital as a fraction of one.
How to read the number
Answers whether the business creates value or consumes it: accounting profit can be positive while added value is negative.
When the metric lies
The result depends on the measurement of capital and on the rate — the two most contested inputs. The measure suits the trend of one company rather than a ranking of several.
Also known as: eva