Value added can be defined as:
A)The difference between sales and expenses
B)The difference between the sales value of a firm's output and the cost of physical inputs used to produce that output*
C)The difference between the sales value of a firm's output and the direct costs of producing it
D)EBITDA (earnings before interest,tax,depreciation,and amortization)

Question

Quizplus · Accepted Answer

Value added is the difference between the sales value of a firm's output and the cost of physical inputs used to produce that output. It represents the additional value that is created by the firm's production process. Thus, option B is the correct definition of value added. Option A is incorrect as it only represents the gross profit of the firm. Option C is incorrect as it only considers the direct production costs and does not take into account other overheads. Option D is irrelevant as it represents a different financial metric altogether.

Value Added Can Be Defined As