The equation for economic value added excludes operating income and current liabilities.

Question

Quizplus · Accepted Answer

The equation for economic value added includes operating income and also takes into account current liabilities. Economic value added is calculated by subtracting the cost of capital from the net operating profit after taxes (NOPAT). The formula for EVA is EVA = NOPAT - (Capital * Cost of Capital), where capital includes both equity and liabilities. Therefore, current liabilities are considered in the calculation of EVA.

The Equation for Economic Value Added Excludes Operating Income and Current