Glossary

Economic Value Added (EVA) is an economic performance metric that results from comparing a firm’s return on capital ROC with its cost of capital r. In its simplest version, the formula is: EVA = (ROC - r) x Total capital When a firm’s return on capital exceeds its cost, the performance is satisfactory from investors’s point of view. Currency management can affect EVA in a variety of ways. ROC can be enhanced by buying and selling in foreign currencies, while a solid risk management process could lead —everything else remaining equal— and to a lower r. Both impacts would create more Economic Value Added.