Cash Value Added - CVA
Categories: Insurance, Tax, Trusts and Estates
The Boston Consulting Group is one of the world’s top consulting joints. But sometimes they come up with something so nerdy that it’s hard not to lock their analysts in janitor closets.
The group devised a financial metric known as Cash Value Added. They just repackaged the idea of EBITDA. Basically, it’s a measurement of a firm’s capacity to produce cash flow that is higher than the cost of capital. The most popular method of measuring this metric comes from this equation:
CVA = Total cash flow - capital charge - economic depreciation
Math nerds rejoice.
