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    Economic Value Added

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    What is EVA i.e Economic Value Added? How it used to know the performance of the business?

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    The consulting firm of Stern Stewart published The Real Key to Creating Wealth (John Wiley & Sons, New York, 1998) which "celebrates a revolution in management known as economic value added (EVA)." Stern Stewart claims that:
    EVA is the only true indicator of business and management performance;
    EVA is "today's hottest financial idea and getting hotter";
    EVA "allows all financial decisions to be modeled, monitored, evaluated, communicated, and compensated in terms of a single measure"
    The Fundamentals of Value Creation
    EVA measures ...

    Solution Summary

    This explains the concept of Economic value added and the steps to compute it.