Economic value added

Economic Value Added (EVA) is a financial metric that measures a company's true profitability by assessing whether it generates returns above its cost of capital. It is calculated by subtracting the company's overall cost of capital from its net operating profit after taxes (NOPAT). Essentially, EVA shows if the company is creating value for its shareholders—earning enough to cover the expenses of the invested capital—and generating surplus profit beyond that. A positive EVA indicates value creation, while a negative EVA suggests the company is not earning enough to justify its investments.