EVA is the abbreviation of English Economic Value Added, which is generally translated as additional economic value. It is an index or method to comprehensively measure the real profit or value creation of enterprise production and operation.

The premise of studying enterprise value creation ability is to measure EVA. Stern Stewart, an American economist, first proposed an EVA accounting method based on Western Accounting Standards (GAAP) to measure the capital efficiency of enterprises. This method not only greatly modifies the traditional profit calculation method, but also reconstructs the capital balance sheet, and uses the new EVA capital balance sheet to measure the actual capital investment or occupation of enterprises. This new accounting calculation method mainly consists of three elements: (1)EVA after-tax income; (2) The actual capital investment of the enterprise; (3) ratio of capital cost. After determining these three elements, the economic added value (EVA) of the enterprise can be directly calculated by the following formula:

EVA=EVA after-tax income-(capital cost rate × capital investment)

Or EVA =(EVA after-tax rate of return-capital cost rate) × capital investment.