There are potentially over 160 adjustments but in practice, only several key ones are made, depending on the company and its industry.
The basic formula is: where: EVA calculation: EVA = net operating profit after taxes – a capital charge [the residual income method] therefore EVA = NOPAT – (c × capital), or alternatively where NOPAT is profits derived from a company's operations after cash taxes but before financing costs and non-cash bookkeeping entries.
Another perspective on EVA can be gained by looking at a firm's return on net assets (RONA).
Although in concept, these approaches are in a sense nothing more than the traditional, commonsense idea of "profit", the utility of having a more precise term such as EVA is that it makes a clear separation from dubious accounting adjustments that have enabled businesses such as Enron to report profits while actually approaching insolvency.
EVA-PBC methodology plays an interesting role in bringing strategy back into financial performance measures.