Added value

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Added value in financial analysis of shares is to be distinguished from value added. Used as a measure of shareholder value, calculated using the formula:

Added Value = Sales - Purchases - Labour Costs - Capital Costs

Added Value can also be defined as the difference between a particular product's final selling price and the direct and indirect input used in making that particular product.

The difference is profit for the firm and its shareholders after all the costs and taxes owed by the business have been paid for that financial year. Value added or any related measure may help investors decide if this a business that is worthwhile investing on, or that there are other and better opportunities (fixed deposits, debentures).

For other consultancy measures for shareholder value, see

• Economic Value Added
• Market value added.

[edit] References

• Kay, J. (1993) Foundations of Corporate Success, Oxford: Oxford University Press.