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Encyclopedia > Economic value added
Corporate finance

Working capital management
Cash conversion cycle
Return on capital
Economic value added
Just In Time (business)
Economic order quantity
Discounts and allowances
Factoring (finance)
Corporate finance is an area of finance dealing with the financial decisions corporations make and the tools and analysis used to make these decisions. ... Image File history File links Download high resolution version (1031x740, 688 KB)Midtown Manhattan looking North from the Empire State Building, 2005. ... Corporate finance is a specific area of finance dealing with the financial decisions corporations make and the tools as well as analysis used to make these decisions. ... Cash conversion cycle, also known as asset conversion cycle, net operating cycle or just cash cycle, is a ratio used in the financial analysis of a business. ... Return on capital, also known as Return On Invested Capital (ROIC) is defined as NOPLAT / Invested Capital usually expressed as a percentage. ... Just In Time (JIT) is an inventory strategy implemented to improve the return on investment of a business by reducing in-process inventory and its associated costs. ... Economic Order Quantity (also known as the Wilson EOQ Model or simply the EOQ Model) is a model that defines the optimal quantity to order that minimizes total variable costs required to order and hold inventory. ... Discounts and allowances are modifications to the basic price. ... Factoring is often used synonymously with accounts receivable financing. ...

Capital budgeting
Capital investment decisions
The investment decision
The financing decision
Capital investment decisions
The process of determining which potential long-term projects are worth undertaking, by comparing their expected discounted cash flows with their internal rates of return. ... Corporate finance is an area of finance dealing with the financial decisions corporations make and the tools and analysis used to make these decisions. ... Corporate finance is an area of finance dealing with the financial decisions corporations make and the tools and analysis used to make these decisions. ... Corporate finance is an area of finance dealing with the financial decisions corporations make and the tools and analysis used to make these decisions. ... Corporate finance is an area of finance dealing with the financial decisions corporations make and the tools and analysis used to make these decisions. ...

Sections
Managerial finance
Management accounting
Mergers and acquisitions
Balance sheet analysis
Business plan
Corporate action
Managerial Finance is that branch of finance that provide tools for a companys financial managers. ... Management accounting is concerned with the provisions and use of accounting information to managers within organizations, to provide them with the basis in making informed business decisions that would allow them to be better equipped in their management and control functions. ... This article or section cites very few or no references or sources. ... In formal bookkeeping and accounting, a balance sheet is a statement of the book value of all of the assets and liabilities (including equity) of a business or other organization or person at a particular date, such as the end of a fiscal year. ... A business plan is a formal statement of a set of business goals, the reasons why they are believed attainable, and the plan for reaching those goals. ... A corporate action is an event taken by a public company that has a direct financial impact on of its shareholders. ...


Finance series
Financial market
Financial market participants
Corporate finance
Personal finance
Public finance
Banks and Banking
Financial regulation
Finance studies and addresses the ways in which individuals, businesses, and organizations raise, allocate, and use monetary resources over time, taking into account the risks entailed in their projects. ... In economics a financial market is a mechanism that allows people to easily buy and sell (trade) financial securities (such as stocks and bonds), commodities (such as precious metals or agricultural goods), and other fungible items of value at low transaction costs and at prices that reflect efficient markets. ... There are two basic financial market participant catagories, Investor vs. ... Corporate finance is an area of finance dealing with the financial decisions corporations make and the tools and analysis used to make these decisions. ...  United States Personal finance is the application of the principles of finance to the monetary decisions of an individual or family unit. ... Public finance (government finance) is the field of economics that deals with budgeting the revenues and expenditures of a public sector entity, usually government. ... “Banker” redirects here. ... Financial supervision is government supervision of financial institutions by regulators. ...

v d

Economic Value Added (EVA) is an estimate of true economic profit after making corrective adjustments to GAAP accounting, including deducting the opportunity cost of equity capital. EVA can be measured as Net Operating Profit After Taxes(or NOPAT) less the money cost of capital. Money cost of capital refers to the amount of money rather than the proportional rate (cost of capital). The amortization of goodwill or capitalization of brand advertising and other similar adjustments are the translations that occur to Economic Profit to make it EVA.

Contents

Calculating EVA

In the field of corporate finance, economic value added is a way to determine the value created, above the required return, for the shareholders of a company. Corporate finance is an area of finance dealing with the financial decisions corporations make and the tools and analysis used to make these decisions. ... A shareholder or stockholder is an individual or company (including a corporation) that legally owns one or more shares of stock in a joint stock company. ... It has been suggested that this article or section be merged into Types of corporations. ...


The basic formula is:

EVA  =  ( r - c ) cdot K  =  NOPAT - c cdot K

where

r = { NOPAT over K } , called the return on capital employed (ROCE)

is the firm's return on capital, NOPAT is the Net Operating Profit After Tax, c is the Weighted Average Cost of Capital (WACC) and K is capital employed. Net Operating Profit After Tax or NOPAT is a companys after-tax operating profit for all investors, including shareholders and debt holders. ... The weighted average cost of capital (WACC) is used in finance to measure a firms cost of capital. ... The Weighted Average Cost of Capital (WACC) is used in finance to measure a firms cost of capital. ...



Shareholders of the company will receive a positive value added when the return from the capital employed in the business operations is greater than the cost of that capital; see Working capital management. Any value obtained by employees of the company or by product users is not included in the calculations. Corporate finance is an area of finance dealing with the financial decisions corporations make and the tools and analysis used to make these decisions. ...


Other Measures of Shareholder value

Shareholder value is a term used in many ways: To refer to the market capitalization of a company (rarely used) To refer to the concept that the primary goal for a company is to enrich its shareholders (owners) by paying dividends and/or causing the stock price to increase To... Market Value Added (MVA) is the difference between the current market value of a firm and the capital contributed by investors. ...

See also

Free cash flow measures a firms cash flow remaining after all expenditures required to maintain or expand the business have been paid off--for example, interest payments and investments in property, plant and equipment (PP&E). ... The weighted average cost of capital (WACC) is used in finance to measure a firms cost of capital. ...

References

  • G. Bennett Stewart III. The Quest for Value. HarperCollins. 
  • Stephan Hostettler, Hermann Stern. Das Value Cockpit. Wiley. 

External links


  Results from FactBites:
 
Economic value added - Wikipedia, the free encyclopedia (339 words)
Economic Value Added (EVA) is often defined as the value of an activity that is left over after subtracting from it the cost of executing that activity and the cost of having lost the opportunity of investing consumed resources in an alternative activity.
In the field of corporate finance, economic value added is a way to determine the value created, above the required return, for the shareholders of a company.
Shareholders of the company will receive a positive value added when the return from the equity employed in the business operations is greater than the cost of that capital; see Working capital management.
Value added - Wikipedia, the free encyclopedia (1365 words)
In modern neoclassical economics, especially in macroeconomics, it refers to the contribution of the factors of production, i.e., land, labor, and capital goods, to raising the value of a product and corresponds to the incomes received by the owners of these factors.
The sum of the value added in each of the different stages of production equals the value of the final product, the product that drops out of the production process and is thus not incorporated in some new product.
Net value added is obtained by deducting consumption of fixed capital (or depreciation charges) from gross value added.
  More results at FactBites »


 

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