Describe in Brief the Meaning of Economic Value Added (EVA)

Essay

Describe in brief the meaning of Economic Value Added (EVA) and its implications.
There is yet another measure that has become popular in finance to measure the true value that a product or an organization returns to its shareholders: economic value added (EVA). The simple explanation of economic value-added is that it considers how much money the company makes from operations after taxes, less the cost of the capital that the company had tied up to make that money. It is essentially a measure of the surplus value generated by an investment. If the value is negative, the investment did not pay for itself. If it is zero, the investment basically broke even, considering what else could have been done with the capital employed. A positive EVA demonstrates that a company is really adding value.