What is Economic value added?
By Haresh Ratnagrahi, Founder, HiPrep (CPA, FCA, CMA (US), CISA, CRISC)
Definition
A performance measure equal to after-tax operating profit minus a charge for the capital employed. A positive result means the business earned more than its cost of capital.
Where Economic value added matters
CPA (US): The global gold standard for accounting and audit. 4 Exams: 3 Core + 1 Discipline; 4 hrs Per section; 75 Passing score (0–99 scale); Prometric Test centres worldwide. Parts: FAR Financial Accounting & Reporting; AUD Auditing & Attestation; REG Taxation & Regulation.
CMA (US): The credential for management accounting and finance leadership. 2 Exam parts; 4 hrs Per part: 100 MCQs + 2 essays; 360 Passing score (0–500 scale); 3 yrs To complete both parts from your first. Parts: Part 1 Financial Planning, Performance and Analytics; Part 2 Strategic Financial Management.
Enrolled Agent (EA): The fastest route to practising US tax. 3 Exam parts (SEE); 3.5 hrs Per part: 100 MCQs; 105 Passing score (40–130 scale); 2 yrs To pass all three parts. Parts: Part 1 Individuals; Part 2 Businesses; Part 3 Representation, Practices and Procedures.
Related terms explained
WACC: The weighted average cost of capital: the blended cost of a company’s debt and equity, weighted by their proportions, with debt adjusted for the tax shield.
CMA Part 2: Strategic Financial Management: financial statement analysis, corporate finance, decision analysis, risk, investment decisions and ethics.
How HiPrep teaches it
In HiPrep, Economic value added is taught concept-first and then practised in a Prometric-style simulator. Every answer is built step by step so you see how a result is reached, explanations are available in English, Hindi, Tamil, Telugu and Kannada, and a mentor is behind the platform for doubts. Start with the free diagnostic to see where Economic value added sits in your plan.