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| Name | Economic Value Added (EVA) - Part 2 (Concept) |
| Video Uploader | Video From WolvesAndFinance |
| Upload Date | This Video Uploaded At 06-06-2016 03:01:24 |
| Video Discription | ZACH DE GREGORIO, CPA www.WolvesAndFinance.com This video discusses the concept of Economic Value Added (EVA). The goal of EVA is to translate the financial statements to gain an understanding of the economic value created from the core business activities. You are taking your balance sheet and income statement, tearing them apart, and then smashing them back together to create the metric EVA. Some of the adjustments that are required are: 1) Land Sales 2) Capital Structure and 3) Leases. There are others as well. After the adjustments you are left with two values: profit and the assets used to create that profit. The equation for EVA can be simplified as EVA = NOPAT - capital charge. This is a fundamental concept in business. An example, would be to think of your business with zero assets. If someone gave you the capital, EVA would be the difference between the profit you create and that capital. EVA is related to productivity, because the higher the productivity, the higher the EVA. This teaches us the core concept that to increase EVA, organizations should strive to increase profits while decreasing assets. It does no good to hold assets that don't contribute to generating profit. Capital tends to flow towards areas of high productivity. Investors are out there, calculating company's EVA and looking for the best opportunities to get a return on investment. Neither Zach De Gregorio or Wolves and Finance Inc. shall be liable for any damages related to information in this video. It is recommended you contact a CPA in your area for business advice. |
| Category | People & Blogs |
| Tags | Finance | Corporate Finance | Accounting | Valuation | Capital charge | WACC |
