BAR Performance Measurement · Updated November 2026
EVA: Did the Company Earn More Than Its Cost of Capital?
EVA asks whether operating profit exceeded the economic cost of the capital employed.
EVA concept
A simplified framework is NOPAT − Capital Charge = EVA.
Capital charge
Capital charge generally reflects invested capital multiplied by WACC.
Positive EVA
Suggests the company generated operating returns above its cost of capital.
Negative EVA
Suggests accounting operations did not earn enough to cover the required return on invested capital.
Why it matters
A company can report positive accounting earnings while still destroying economic value if returns are below the cost of capital.
The takeaway
EVA measures profit after charging the business for the capital it uses.
Related Summit guides
FAQ
Is EVA the same as net income?
No.
Does WACC affect EVA?
Yes.
Can a profitable company have negative EVA?
Yes.