Cash value added (CVA) is a measure of business Profit (accounting), profitability defined as
the EBITDA generated by the business, less tax, less its required return.
The required rate of return, required return is an Annuity (finance theory), annuity based on the purchase price of the assets in use in the business, inflated to today's value of money, the weighted average cost of capital (WACC) and the economic life of the assets.
CVA can also be expressed as an index, where the CVA is divided by the required return. An index of more than 1.0 will indicate profitability while an index below 1.0 will indicate value destruction.
See also
*Economic value added (EVA)
*Return on capital employed (ROCE)
*Return on equity (ROE)
References
Valuation (finance)
Profit
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