Measuring Economic Value Added: A Survey of the Practices of EVA(R) Proponents

Abstract

Over the past decade, consultants, the popular business press, a number of companies, and a few investment analysts have heralded Economic Value Added (EVA(R)). In theory, EVA is net operating profit after tax (NOPAT) less a capital charge for the invested capital (IC) employed in the business. This survey bridges the gap between theory and practice by detailing how EVA proponents measure EVA. This survey is important because its fieldwork identifies significant inconsistencies in the measurement of EVA and its major components.