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Economics: An A-Z Guide by Matthew Bishop

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V

Value added

This usually refers to FIRMS, where it is defined as the value of the firm’s OUTPUT minus the value of all its inputs purchased from other firms. It is therefore a measure of the PROFIT earned by a particular firm plus the WAGES it has paid. As a rule, the more value a firm can add to a product, the more successful it will be. In many countries, the main form of INDIRECT TAXATION is value-added tax, which is levied on the value created at each stage of production. However, it is paid, ultimately, by whoever consumes the finished product.

Another definition of value added refers to the change in the overall economic value of a company. This takes into account changes in the combined value of its SHARES, ASSETS, DEBT and other ...

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