Calculate the true economic profit of a company by subtracting the cost of all capital used from operating profit.
Profit & Capital
Value Creation Analysis
EVA$195,000Value Created
NOPAT$395,000
Capital Charge$200,000
Earnings vs. Capital Costs
About this calculator
Overview
Calculate the true economic profit of a company by subtracting the cost of all capital used from operating profit.
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Pro Tips
What is EVA?: Economic Value Added (EVA) is a measure of a company's financial performance based on residual wealth, calculated by deducting its cost of capital from its operating profit, adjusted for taxes on a cash basis.
How does it differ from Net Income?: Net income only subtracts the cost of debt (interest). EVA subtracts the cost of ALL capital, including equity. It shows whether a firm is actually earning more than its required return.
What if EVA is negative?: A negative EVA means the company is 'destroying value'—it would have been better for shareholders to invest their money elsewhere at the same risk level.
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Fun Facts
"EVA was popularized by the consulting firm Stern Stewart & Co. in the 1990s."
"Many large corporations use EVA as a key metric for determining executive bonuses."
"EVA is closely related to the concept of 'Economic Rent' or 'Residual Income'."
