Cash Value Added

Knowledge Center

Summary, forum, best practices, expert tips and information sources.

The Cash Value Added (CVA) model includes only cash items, i.e. Earnings Before Depreciation Interest and Tax (EBDIT, adjusted for non cash charges), working capital movement and non-strategic investments. The sum of those three items is the Operating Cash Flow (OCF). The OCF is compared with a cash flow requirement, "the Operating Cash Flow Demand" (OCFD). This OCFD represents the cash flow needed to meet the investor's financial requirements on the company's strategic investments, i.e. the Cost of Capital.

Opportunity cost of capital in cash terms

Instead of measuring the investor's opportunity Cost of Capital in percentage terms, the CVA model uses the investor's opportunity Cost of Capital in cash terms. The difference between the OCF and the OCFD is the "Cash Value Added" - CVA. The CVA for a period is a good estimate of the cash flow generated above or below the investor's requirement for that period. This analysis can be done at each level of the company and the CVA for the company is the aggregate CVA of its Strategic investments.

CVA compared with MVA

Unlike Market-based measurements, such as MVA, Cash Value Added (CVA) can be calculated at divisional (Strategic Business Unit) level.

Unlike Securities measurements, CVA is a flow and can be used for performance evaluation over time.

CVA compared with EBIT

Unlike accounting profit, such as EBIT, Net Income and EPS, Cash Value Added (CVA) is Economic and is based on the idea that a company must cover both the operating costs AND the Cost of Capital.

Formula of Cash Value Added


-     Costs


      Operating Surplus

+-   Working Capital Movement

-     Non-strategic Investments


      Operating Cash Flow

-     Operating Cash-Flow Demand


      Cash Value Added - CVA

Book: Andrew Black - Questions Of Value -

Cash Value Added Special Interest Group

Special Interest Group (11 members)

Forum about Cash Value Added  

The most recent topics about: Cash Value Added.

🔥 NEW Advantage of Cash Value Added Concept versus Economic Value Added
The cash value added concept is based, as opposed to economic value added, on cash flow figures and therefore offers lit (...)
1 reactions
Best Practices about Cash Value Added

Here you will find the most valuable ideas and practical suggestions.

Expert Tips about Cash Value Added

Here you will find professional advices by experts.

Information Sources about Cash Value Added

Here you will find powerpoints, videos, news, etc. to use in your own lectures and workshops.


Comparing EVA and CVA (...)

Measuring Profitability

EVA CVA NPV investing (...)

Compare with Cash Value Added:  EVA  |  CFROI  |  Economic Margin  |  Cash Flow from Operations  |  Dividend Payout Ratio

Return to Management Hub: Decision-making & Valuation  |  Finance & Investing

More Management Methods, Models and Theory

Special Interest Group Leader

Are you an expert in Cash Value Added? Sign up for free

Link to this knowledge center

Copy this code to your web site:


About 12manage | Advertising | Link to us / Cite us | Privacy | Suggestions | Terms of Service
© 2020 12manage - The Executive Fast Track. V15.6 - Last updated: 24-9-2020. All names ™ of their owners.