EVA
AccountingDefinition
Economic Value Added. NOPAT minus a charge for the cost of capital (capital employed × WACC). Positive EVA means the company is creating shareholder value above its cost of capital; negative means it's destroying value.
EVA reframes profitability around capital efficiency. Popular at Stern Stewart in the 1990s as a management compensation tool. Less used now but conceptually clean.
EVA reframes profitability around capital efficiency. Popular at Stern Stewart in the 1990s as a management compensation tool. Less used now but conceptually clean.
Formula
EVA = NOPAT − (Capital × WACC)