First, thanks for the great content you're sharing with us. One thing is not clear for me yet, though... what is the difference between EVA and NPV? From what I understand, they both take into account the cost of capital over time and it's effect on the cashflow. Could you give me a hand?
There are a number of differences. First, EVA is based on accounting statements and NPV is cash flow based. Also, NPV is forward-looking whereas EVA uses information from the past and assumes that it continues into the future. However, saying that, you can theoretically show that under certain conditions, both EVA and NPV are equivalent.
Dont you think the explained concept is called "Residual Income" vs "EVA". EVA gets adjusted for ECONOMIC PROFIT AND ECONOMIC CAPITAL EMPLOYED, which is not explained in this video.
Hi, Gautham. I thought I replied to this but it hasn't appeared. Apologies for the delay in responding. I'm more than happy to do a more detailed video of EVA and its variants if there is enough demand. Let me know and I'll put it on my list of future videos to do. David
Let me look into what technology I require and if it makes sense I will have a go. I don't like to stand in front of a blackboard, so it would need to be through my ipad or something similar.
What are the assumptions in EVA
]
First, thanks for the great content you're sharing with us. One thing is not clear for me yet, though... what is the difference between EVA and NPV? From what I understand, they both take into account the cost of capital over time and it's effect on the cashflow. Could you give me a hand?
There are a number of differences. First, EVA is based on accounting statements and NPV is cash flow based. Also, NPV is forward-looking whereas EVA uses information from the past and assumes that it continues into the future. However, saying that, you can theoretically show that under certain conditions, both EVA and NPV are equivalent.
Thank you !
Dont you think the explained concept is called "Residual Income" vs "EVA". EVA gets adjusted for ECONOMIC PROFIT AND ECONOMIC CAPITAL EMPLOYED, which is not explained in this video.
Hi, Gautham. I thought I replied to this but it hasn't appeared. Apologies for the delay in responding. I'm more than happy to do a more detailed video of EVA and its variants if there is enough demand. Let me know and I'll put it on my list of future videos to do. David
Let me look into what technology I require and if it makes sense I will have a go. I don't like to stand in front of a blackboard, so it would need to be through my ipad or something similar.