online dictionaries of abbreviations

C E F I L N O P R T V W
EV

EVA

Economic Value Added
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 business terms, one could calculate EVA as Income from Operations minus potential income from investing the amount of working capital and equity in sovereign debt, if sovereign debt can be considered an alternative opportunity to invest working capital and equity.

The formula for calculating EVA is as follows:
EVA = Net Operating Profit After Taxes (NOPAT) - (Capital x Cost of Capital)

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

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