Market Value Added (MVA)

Market Value Added (MVA) is a financial metric that measures the difference between the market value of a company’s equity and the capital contributed by investors. It reflects the company’s ability to create wealth for its shareholders. A positive MVA indicates that the company has generated value beyond the capital invested, while a negative MVA suggests that the company has destroyed shareholder value. MVA is often used to assess management’s effectiveness in generating returns.

Example

A company with a market value of $500 million and total invested capital of $400 million has an MVA of $100 million, indicating that it has added value for its shareholders.

Key points

• Measures the difference between a company’s market value and the capital contributed by investors.

• A positive MVA indicates that the company has created shareholder value, while a negative MVA suggests value destruction.

• Used to assess management’s effectiveness in generating returns for investors.

Quick Answers to Curious Questions

What does Market Value Added (MVA) measure?

MVA measures the difference between a company’s market value and the capital invested by shareholders.

What does a positive MVA indicate?

A positive MVA indicates that the company has created value for shareholders beyond the capital they invested.

How is MVA used by investors?

MVA is used to assess management’s ability to generate returns and create shareholder wealth over time.