Cash Surplus Value Added
Encyclopedia
Cash surplus value added (CsVA) is a measure of business profitability
defined as the EBITDA
after tax generated by the business less its required return. The required return is an 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.
CsVA can also be expressed as an index, where the CsVA 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.
Profit (accounting)
In accounting, profit can be considered to be the difference between the purchase price and the costs of bringing to market whatever it is that is accounted as an enterprise in terms of the component costs of delivered goods and/or services and any operating or other expenses.-Definition:There are...
defined as the EBITDA
EBITDA
EBITDA is an acronym for earnings before interest, taxes, depreciation, and amortization. It is a non-GAAP metric that is measured exactly as stated. All interest, tax, depreciation and amortization entries in the income statement are reversed out from the bottom-line net income...
after tax generated by the business less its required return. The required return is an annuity
Annuity (finance theory)
The term annuity is used in finance theory to refer to any terminating stream of fixed payments over a specified period of time. This usage is most commonly seen in discussions of finance, usually in connection with the valuation of the stream of payments, taking into account time value of money...
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
Weighted average cost of capital
The weighted average cost of capital is the rate that a company is expected to pay on average to all its security holders to finance its assets....
(WACC) and the economic life of the assets.
CsVA can also be expressed as an index, where the CsVA 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 addedEconomic value addedIn corporate finance, Economic Value Added or EVA, a registered trademark of Stern Stewart & Co., is an estimate of a firm's economic profit – being the value created in excess of the required return of the company's investors . Quite simply, EVA is the profit earned by the firm less the cost of...
(EVA) - Return on capital employed (ROCE)
- Return on equityReturn on equityReturn on equity measures the rate of return on the ownership interest of the common stock owners. It measures a firm's efficiency at generating profits from every unit of shareholders' equity . ROE shows how well a company uses investment funds to generate earnings growth...
(ROE)