# Economic Value Added

*Corporate Finance & M&A — Finicade finance glossary*

Economic value added is after-tax operating profit minus a charge for the capital employed. It formalises an uncomfortable point: a company reporting a healthy accounting profit while earning below its cost of capital is destroying value. Because it charges managers for the balance sheet they use, EVA-based compensation changes behaviour around working capital and asset-heavy projects.

**Formula:** `EVA = NOPAT − (Invested capital × WACC)`

**Also known as:** EVA, economic profit

**Related terms:** [Return on Invested Capital](https://finicade.com/glossary/return-on-invested-capital), [WACC](https://finicade.com/glossary/wacc), [NPV (Net Present Value)](https://finicade.com/glossary/npv), [Opportunity Cost](https://finicade.com/glossary/opportunity-cost), [Capital Budgeting](https://finicade.com/glossary/capital-budgeting)

Source: https://finicade.com/glossary/economic-value-added