Investing Answers Building and Protecting Your Wealth through Education Publisher of The Next Banks That Could Fail
Investing Answers Building and Protecting Your Wealth through Education Publisher of The Next Banks That Could Fail

Shareholder Value Added (SVA)

What it is:

Shareholder value added (SVA) represents a company's worth to shareholders in the absence of liabilities and capital costs.

How it works (Example):

Shareholder value added (SVA) is expressed as a company's capital costs from stock and bond issues subtracted from its net operating profit after tax (NOPAT).

SVA = NOPAT - Cost of Capital

For instance, if a company's NOPAT is $200,000 and its capital costs are $50,000, its SVA would be $150,000 ($200,000 - $50,000 = $150,000).

Dividends augment SVA while additional issuances of stock lower SVA.

Why it Matters:

SVA is a metric which reflects a company's performance in a way that is meaningful to shareholders. At its most theoretical level, it implies that the primary goal of any company should be to increase the returns to shareholders, not necessarily to create value for the company as a whole. Those seeking ever-higher shareholder value added believe that management should make decisions for the company that caters to shareholder interests first and foremost.

SVA was very popular in the 1980's, but has since lost some clout.

Related Terms View All
  • Auction Market
    Though most of the trading is done via computer, auction markets can also be operated via...
  • Best Execution
    Let's assume you place an order to buy 100 shares of Company XYZ stock. The current quote...
  • Book-Entry Savings Bond
    Savings bonds are bonds issued by the U.S. government at face values ranging from $50 to...
  • Break-Even Point
    The basic idea behind break-even point is to calculate the point at which revenues begin...
  • Calendar Year
    If Company XYZ starts its fiscal year on January 1 and ends its fiscal year on December...