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فيديو شرح Economic Value Added EVA ضمن كورس محاسبة التكاليف شرح قناة Farhat Lectures. The # 1 CPA & Accounting Courses، الفديو رقم 42 مجانى معتمد اونلاين
What is Economic Value Added (EVA), and how do you calculate it? This CPA Exam BAR lecture explains EVA as a measure of a firm's economic profit, showing how it improves on residual income by using the weighted average cost of capital, what accounting adjustments are made, and how to work a full calculation. Ideal for CPA and CMA candidates studying performance measurement and corporate finance, and for accounting students learning value-based metrics.
Try it free at farhatlectures.com — interactive exercises, lectures, simulations, cases, multiple choice, and AI tools for CPA, CMA, EA and students.
Video Timeline & Key Concepts:
0:00 — Definition and purpose: EVA as a refinement of residual income
3:43 — Accounting distortions and adjustments to GAAP figures
5:02 — Calculating the weighted average cost of capital (WACC)
10:24 — Practical example and step-by-step EVA computation
Frequently Asked Questions:
What is Economic Value Added?
Economic Value Added measures the economic profit a company generates after covering the full cost of the capital it uses. It equals adjusted operating income minus a capital charge based on the invested capital and the weighted average cost of capital.
How is EVA different from residual income?
Residual income uses a required rate of return that can be set somewhat arbitrarily, while EVA uses the weighted average cost of capital. Because WACC reflects the firm's actual financing mix, EVA gives a more realistic view of whether the company is creating value.
What adjustments are made when calculating EVA?
Certain GAAP items are adjusted to better reflect economic reality, such as capitalizing research and development instead of expensing it. The investment base is also adjusted, for example by removing specific current liabilities and adding back capitalized items.
Why is WACC used in the EVA calculation?
WACC represents the blended cost of a company's debt and equity, including the tax benefit of interest. Using WACC as the capital charge ensures the firm is measured against the true cost of all the capital financing its operations.
How do you compute the final EVA figure?
EVA equals adjusted income minus the product of adjusted investment and WACC. A positive EVA indicates the company earned more than its cost of capital, meaning it created value for its investors.
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