Financial EVA, also known as economic added value, is the difference between after-tax operating net profit and investment cost in a certain period of time, and is the residual income after deducting all costs.

Economic Value Added (EVA) is a financial evaluation method of enterprise performance based on after-tax operating net profit and the total cost of capital investment required to generate these profits. The economic added value created by the company every year is equal to the difference between the net operating profit after tax and the total capital cost. Capital cost includes debt capital cost and equity capital cost.

If the EVA value is positive, it means that the company's income is higher than the capital cost invested to obtain this income, that is, the company has created new value for shareholders. On the other hand, if EVA is negative, it means that the wealth of shareholders is decreasing.

Definition of EVA and how to calculate it?

EVA= net operating profit after tax-(weighted average cost of capital * total investment capital).

Among them, net operating profit after tax = operating profit+financial expenses+investment income -EVA tax adjustment. Or net operating profit after tax = sales-operating expenses-taxes or net operating profit after tax = operating income ×( 1- income tax rate).