BAR Performance Measurement · Updated November 2026
Economic Value Added vs Residual Income: What Is the Difference?
Both charge for capital, but EVA usually makes more economic adjustments.
Residual income
Residual income subtracts a required return on invested capital from operating income.
EVA
EVA commonly uses after-tax operating profit and a capital charge, often after accounting adjustments.
Why it matters
EVA aims to align performance measurement with economic value creation.
Exam strategy
After-tax operating profit plus cost of capital points toward EVA.
The takeaway
Both measures charge for capital, but EVA usually uses more economic adjustments.
Related Summit resources
FAQ
Do both use a capital charge?
Yes.
Does EVA commonly use after-tax operating profit?
Yes.
Can EVA adjust accounting numbers?
Yes.