8

Economic value added (EVA)

Strategic perspective

Financial perspective

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 ...

Get Key Performance Indicators (KPI) now with O’Reilly online learning.

O’Reilly members experience live online training, plus books, videos, and digital content from 200+ publishers.