The difference between a firm's annual after-tax operating profit and its total annual cost of capital is known as _____.
A) earned income
B) Economic Value Added
C) Managerial Value Added
D) operating income

Question

Quizplus · Accepted Answer

The difference between a firm's annual after-tax operating profit and its total annual cost of capital is known as Economic Value Added (EVA). It is a measure of a company's financial performance based on the residual wealth calculated by deducting its cost of capital from its operating profit. EVA shows how much value a company has created or destroyed in a given period, and can be used to evaluate the effectiveness of managerial decision-making.

The Difference Between a Firm's Annual After-Tax Operating Profit and Its