EVA, or Economic Value Added, is a financial performance measure that helps businesses assess their profitability. It calculates the value created beyond the required return on investment. Essentially, if a company earns more than its cost of capital, it generates positive EVA, indicating effective management and growth potential. This evaluation method encourages companies to focus on long-term value rather than short-term profits. By using EVA, businesses can make informed decisions about investments, resource allocation, and overall strategy. It aligns the interests of management and shareholders, promoting a culture of accountability and sustainable growth.