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Topic: Economic value added

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	Economic value added - Wikipedia, the free encyclopedia
		Economic Value Added (EVA) is often defined as the value of an activity that is left over after subtracting from it the cost of executing that activity and the cost of having lost the opportunity of investing consumed resources in an alternative activity.
		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.
		Shareholders of the company will receive a positive value added when the return from the equity employed in the business operations is greater than the cost of that capital; see Working capital management.
	en.wikipedia.org /wiki/Economic_value_added (339 words)

	Value added - Wikipedia, the free encyclopedia
		In modern neoclassical economics, especially in macroeconomics, it refers to the contribution of the factors of production, i.e., land, labor, and capital goods, to raising the value of a product and corresponds to the incomes received by the owners of these factors.
		The sum of the value added in each of the different stages of production equals the value of the final product, the product that drops out of the production process and is thus not incorporated in some new product.
		Net value added is obtained by deducting consumption of fixed capital (or depreciation charges) from gross value added.
	en.wikipedia.org /wiki/Value_added (1365 words)

	Valuation
		The value of a firm, in DCF terms, can be written in terms of the EVA of projects in place and the present value of the EVA of future projects.
		In this case, the gain from the EVA in the current year may be more than offset by the present value of the loss of EVA from the future periods.
		When the increase in EVA is accompanied by an increase in the cost of capital, either because of higher operational risk or changes in financial leverage, the firm value may decrease even as EVA increases.
	pages.stern.nyu.edu /~adamodar/New_Home_Page/lectures/eva.html (1634 words)

	What is EVA? (Site not responding. Last check: 2007-10-12)
		As such, EVA is an estimate of true "economic" profit, or the amount by which earnings exceed or fall short of the required minimum rate of return that shareholders and lenders could get by investing in other securities of comparable risk.
		EVA has the advantage of being conceptually simple and easy to explain to non-financial managers, since it starts with familiar operating profits and simply deducts a charge for the capital invested in the company as a whole, in a business unit, or even in a single plant, office or assembly line.
		EVA is the only financial management system that provides a common language for employees across all operating and staff functions and allows all management decisions to be modeled, monitored, communicated and compensated in a single and consistent way - always in terms of the value added to shareholder investment.
	www.sternstewart.com /evaabout/whatis.php (791 words)

	Productivity, its evaluation and the economic added value concept
		In 1976 added value per employee in Britain was £3759, whilst in Japan it was £8000.
		The concept of added value applies just as well as an indicator to employees of the proportions of the wealth created that is being taken out in wages and salaries, being retained for further investment or for distribution to shareholders.
		If bargaining and discussions on how to improve added value become part of a participative process it could herald the way for a new attitude towards performance, its measurement and the share to which all employees are entitled.
	www.accel-team.com /productivity/addedValue_05.html (558 words)

	Surplus-value Encyclopedia Article @ USGrant.com (US Grant) (Site not responding. Last check: 2007-10-12)
		To the extent that increasingly the economic surplus is convertible into money and expressed in money, the amassment of wealth is possible on a larger and larger scale (see capital accumulation and surplus product).
		The overriding motive behind efforts to economise resources and labor is to obtain the maximum possible increase in income and capital assets ("business growth"), and provide a steady or growing return on investment.
		The clash of economic interests that invariably results, implies that the battle for surplus value will always involve an irreducible moral dimension; the whole process rests on complex system of negotiations, dealing and bargaining in which reasons for claims to wealth are asserted, usually within a legal framework.
	www.usgrant.com /encyclopedia/Surplus-value (3464 words)

	Valuing Operating Assets in Place and Computing Economic Value Added
		EVA is a measure of residual income, which focuses on the concept that a company must earn an adequate risk-adjusted return on its investment in assets.
		EVA is a measure of the income from a company’s operations that exceeds the risk-adjusted cost of the investment.
		The expected future EVA from existing operating assets in place (the third component in Formula 3) is presented in Exhibit 4, Panel A. It is calculated from the expected annual EVA from existing assets, discounted at the WACC, less the amount invested.
	www.nysscpa.org /cpajournal/2004/1104/essentials/p56.htm (2612 words)

	Maximizing Shareholder Value: Understanding Economic Value Added - CBIZ Valuation Group, LLC
		EVA is said to be the panacea that improves corporate governance, makes managers think, act and get paid like owners and re-engineers the financial management system to measure and reward value-creating activities.
		EVA is computed by subtracting from the net income the opportunity cost of equity capital as if it were leased from outside.
		A critical requirement for EVA analysis is to recognize all of the resources being used in a particular business activity, a task which requires a good understanding of the business.
	www.cbiz.com /valuationgroup/page.asp?pid=1549 (1486 words)

	Economic Value Added (EVA®) (Site not responding. Last check: 2007-10-12)
		Value that has been created or destroyed by the firm during the period can be measured by comparing profits with the cost of capital used to produce them.
		Finally, the weighted average cost of capital, based on the relative values of debt and equity and their respective cost rates, is used to arrive at the cost of capital which is multiplied by the capital employed and deducted from the NOPAT value.
		EVA is more than just performance measurement system and it is also marketed as a motivational, compensation-based management system that facilitates economic activity and accountability at all levels in the firm.
	www.indiainfoline.com /bisc/econ.html (3099 words)

	Evanomics.com main page
		It is practically the same accounting and finance concept as the "Economic Value Added" (EVA) that is a registered trademark of Stern Stewart and CO.
		EVA valuation tutorial which is a presentation (slideshow) with ca 15 slides).
		The term "EVA" is used all over the world in thousands of companies, universities etc. Therefore it is however a bit shame that the company is so jealous about other consultants using this currently very generic name "EVA".
	www.evanomics.com (322 words)

	Herman Miller - for Healthcare - Economic Value Added
		EVA is an internal measurement of operating and financial performance that is linked to incentive compensation for all employee-owners.
		Under the terms of the EVA plan, we shifted our focus from budget performance to long-term continuous improvements and the creation of economic value.
		EVA has proven to be a strong corollary to shareholder value since its adoption.
	www.hermanmiller.com /CDA/SSA/Category/0,1564,a9-c378,00.html (179 words)

	Economic Value Added
		Economic Value Added computes the value created or destroyed each year by deducting a charge for capital from the NOPAT of the companies.
		EVA (Economic Value Added) is a measure of shareholder value and is the value added by the company for its investors by generating profits in excess of the cost of capital employed by the company.
		The latter is achieved through the EVA based performance linked variable remuneration (PLVR) scheme, which directly links remuneration of employees to the value added to the shareholder’s funds by the company.
	www.ximb.ac.in /~ramana/CourseWeb/FinancEVA.htm (592 words)

	Understanding Economic Value Added
		Economic profit is NOPAT minus a capital charge, which represents a sort of rental fee charged to the company for its use of capital.
		In other words, economic profit is the profits (or returns) our company must generate in order to satisfy the lenders and shareholders who have "rented" capital to the company.
		Of course, it fully serviced its debt, but the point of economic profit is to charge the company for the use of equity capital – when we incorporate this cost, we find that Disney lost (some would say "destroyed value") $765 million in economic profit over the year.
	www.investopedia.com /university/EVA/EVA4.asp (1438 words)

	Economic Profit
		Economic profit is a RAPM that is widely employed for assessing a firm's financial performance.
		The concept is that a firm only adds value for its shareholders if it makes a profit in excess of what could have been earned if its capital were invested elsewhere.
		Usually, economic capital is used, but there is flexibility in how this is defined.
	www.riskglossary.com /articles/economic_profit.htm (387 words)

	ECONOMIC VALUE ADDED (EVA) (Site not responding. Last check: 2007-10-12)
		Economic Value Added (EVA), or economic rent, is a widely recognized tool that is used to measure the efficiency with which a company has used its resources.
		In other words, EVA is the difference between return achieved on resources invested and the cost of resources.
		Market Value Added (MVA) – which is the difference between the market value of the company and the total capital invested in the company – recognizes the EVA performance of companies.
	www.1000ventures.com /business_guide/crosscuttings/economic_value_added.html (461 words)

	Finance: Economic Value Added \| redworld.biz
		According to the people whose brain child EVA is, it’s the financial performance measure that comes closer than any other to calculating the true economic profit of an enterprise.
		As such EVA is an estimate of true economic profit or the amount by which earnings exceed or fall short of the required minimum rate of return that shareholders and vendors could get by investing in other securities of comparable risk.
		If you like a post office would have an EVA valuation and all the EVAs of the post offices or all the EVAs of the different stores of Marks and Spencers when amalgamated would kind of make the economic profit of Marks and Spencers or the post offices for the year.
	www.redworld.biz /rebusiness/issue/vol3/issue04/finance (1101 words)

	Economic Value Added: A Conscience for Business (Site not responding. Last check: 2007-10-12)
		By value creation I mean the creation of value through integrative (pie expanding) relationships with the primary corporate constituencies of shareholders, lenders, customers, employees, suppliers, and the communities in which the firm does business.
		EVA stands for “economic value added.” It is a version of the concept of economic profit based on the work of Nobel Laureate Merton Miller and developed by well-regarded financial consultants Joel Stern and Bennett Stewart.
		The EVA discipline attempts to remedy that disconnect by charging company employees at both corporate and divisional levels with the cost of capital, forcing them to manage the company’s assets as if they were their own.
	www.acton.org /publicat/randl/interview.php?id=478 (2367 words)

	Economic Value Added (EVA) - Sify.com
		EVA is basically the difference between the operating profit and the cost of capital employed.
		EVA incorporates a thinking about financial structures that also facilitates a better understanding of the mechanics in a balance sheet and P&L. Pure cash flow analysis will miss crucial opportunities by disregarding companies with negative cash flows.
		This economic value will sooner or later be translated into an increased intrinsic value, but more importantly, an increased market value, which you as a shareholder would very much appreciate.
	sify.com /finance/tax/fullstory.php?id=13943797 (2406 words)

	Central European Capital LLC
		EVA, the economic profit attributable to shareholders after the cost of all capital has been covered, is an unambiguous measure for the true profitability and value creation by company management.
		EVA, the economic profit attributable to shareholders after the cost of all capital is covered, is an unambiguous measure for true profitability and value creation by company management.
		The final results of "The 2001 EVA™ Ranking Czech Republic" presenting the 100 best companies according to their Economic Value Added in the Czech Republic for the fiscal year 2001 will be published in October 2002.
	www.ce-capital.com /news.php (2811 words)

	Economic Value Added, Economic Profit and Market Value - Part I (Site not responding. Last check: 2007-10-12)
		EVA is a function of the relationship between a firm’s earnings and its cost of capital, and MVA is a function of that firm’s expected future EVA.
		So $EVA is a function of earnings in excess of a firm’s equity cost of capital and %EVA is a function of a firm’s ROE less its percentage equity cost of capital.
		This analysis of EVA thus far validates the concept that return on equity is an important driver of the value of equity securities.
	www.bizval.com /Publications/elaw/archive/elaw0104.htm (2541 words)

	Economic Value Added (EVA)
		Economic Value Added (EVA) is a financial performance method to calculate the true economic profit of a corporation.
		EVA can be calculated as net operating after taxes profit minus a charge for the opportunity cost of the capital invested.
		EVA is an estimate of the amount by which earnings exceed or fall short of the required minimum rate of return for shareholders or lenders at comparable risk.
	www.valuebasedmanagement.net /methods_eva.html (226 words)

	Economic Value Added (EVA) Working Paper by Chen and Dodd (Site not responding. Last check: 2007-10-12)
		Since wealth (or value or return) created is a primary concern to investors, proponents claim that EVA® is the only measure that ties directly to the intrinsic value of a company´s stock (Stewart, 1991).
		First, all of the regressions, except one (1988 EVA® regression), are significant at the 0.01 level according to F statistics, suggesting that the Easton and Harris model provides a good description of the relation between stock returns and each of the profitability measures.
		Although using EVA® rather than RI may provide some benefit to the firm, the benefit may not be significant enough to warrant the extra cost involved in making the adjustments to the audited financial statements.
	www.cbpa.drake.edu /dodd/research/mbaa/article.html (5621 words)

	Bain & Company : Management Tools - The tools - Economic Value-Added Analysis
		Economic Value-Added Analysis thus offers a truer picture of the return a company delivers to its shareholders and provides a framework to assess options for increasing it.
		By making the cost of capital visible, Economic Value-Added Analysis helps companies identify whether they need to operate more efficiently, to focus investment on projects that are in the best interests of shareholders and to work to dispose of or reduce investment in activities that generate low returns.
		Since Economic Value-Added Analysis accounts for the cost of capital used to invest in a business, it provides a clear understanding of value creation or degradation over time within the company.
	www.bain.com /management_tools/tools_economic.asp?groupcode=2 (481 words)

	Economic Value Added and the measure of economic profitability
		The reason being that EVA captures not only the income statement, but also the opportunity cost of the capital invested in order to generate accounting profits.
		Economic profitability incorporates the very real costs of holding excess inventory, extending payment terms or investing in specialized equipment, yielding a true measure of the profitability of your customers.
		Defining EVA as the right measure of customer profitability is an important first step in unlocking the potential of your organization.
	www.acornsys.com /economicvalueadded.html (296 words)

	EVA - Definition (Site not responding. Last check: 2007-10-12)
		Economic Value Added, a measure of the superiority of the return a company is able to realize on invested capital above the baseline return expected by the investment community.
		Positive EVA means the project will add value for shareholders; negative EVA means they would be better off if management just gave them the money as a dividend.
		EVA is analogous to earnings; but where earnings expenses debt financing only, the C x K
	www.moneychimp.com /glossary/eva.htm (105 words)

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