Creating values: Hindustan Lever Limited

Abstract

Economic value added (EVA) has become a buzzword in the corporate world. EVA measures how much a company has earned over and above its cost of capital, which includes both debt and equity. EVA represents value added to company investors, produced by generating operating profit in excess of the cost of capital employed. This, EVA proponents argue, gives a better all round picture compared to just the net profit declared in financial results. In other words, a positive EVA shows that the company has created wealth even though its sales and net profit growth rates may have allowed.