Economic value added is:
A) a long-term performance measure of economic value created over a long period of time.
B) a calculation that does not take into account how the investment is financed.
C) is a measure of the economic increase in an entity's value after an appropriate charge for capital has been deducted.
D) all of the options are true.

Question

Quizplus · Accepted Answer

Economic value added (EVA) is a measure of the economic increase in an entity's value after an appropriate charge for capital has been deducted. It takes into account the cost of capital and compares it to the return on investment, thus giving a better understanding of how much value a company is creating for its shareholders. Option A is incorrect because EVA is a measure of performance over a specific period, not necessarily a long-term measure. Option B is incorrect because EVA does take into account how a company has financed its investments. Option D is incorrect because option B is not true.

Economic Value Added Is