Economic value added (EVA)
Key performance question this indicator helps to answer
How well are we delivering value to our shareholders?
Why is this indicator important?
Conceived by the New York headquartered consultancy Stern-Stewart, EVA is an estimate of a company’s economic profit. It is basically the profit earned by a company less the costs of financing the company’s capital.
It is used as an internal governance mechanism for ensuring that meeting, and exceeding, investor expectations is central to directing all operational activities and investment decisions within the organisation.
EVA is a measure of economic profit that exceeds investor expectations, and as such is a performance ...