Capital allocation refers to the deployment of funds across various units or projects within an organization based on calculated potential returns and risks, often employing techniques like value-at-risk (VaR) and contributing to metrics such as shareholder value and Economic Value Added (EVA).
Economic Value Added (EVA) is a performance measure used to evaluate a company's economic profit, which represents the value added to a company by its activities within a given time period.
Economic Value Added (EVA) is a financial performance measure that calculates the value created beyond the required return on the company's capital. It is an indicator of reflecting a company's ability to generate profit while taking into account the opportunity cost of capital employed.
Residual income is the net income generated by a subsidiary or division after accounting for the costs associated with the capital it uses. This metric is particularly useful in determining the profitability and efficiency of investment projects within larger organizations.
