Market Value Added (MVA) Definition, Importance, Example, Formula & Overview

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Definition: Market Value Added (MVA)

Market value added (MVA) of a company is the concept used to calculate the growth that the company has made during its operations. Market value added (MVA) is calculated by subtracting the market capitalization of the company from the capital contributed by the company’s shareholders.

Market value added is the difference between the present market estimation of the firm and the capital contributed by the investors. It essentially registers the expansion in the estimation of the organization's stock cost. MVA represents the amount of wealth that management has created for investors well beyond their interest in the organization.

Importance of Market Value Added (MVA)

MVA tells how well the company has augmented its shareholder’s value since its start. It analyses a company’s past, present and future utilisation of investment capital. It provides information on the company as a whole because market value and total investment applies to total firm.

1. If MVA is positive: Company has effective management and strong operational capabilities.

2. If MVA is negative: Value of management’s action and investments is less than the capital contributed by the investors.

Another similar concept to evaluate a company's performance is economic added value (EVA).

Market Value Added (MVA)

Formula of Market Value Added (MVA)

The formula for market value added is given by:

MVA = Market capitalization – Capital invested.

Example of Market Value Added (MVA)

A company X has 10000 shares of market value of 10$ each

The total market capitalization of the company X will be 10000*10$= 100000$

The total capital invested by the shareholders of the company is 50000$

Then the MVA of the company will be 100000$ - 50000$ = 50000$.

Hence, this concludes the definition of Market Value Added (MVA) along with its overview.

Browse the definition and meaning of more terms similar to Market Value Added (MVA). The Management Dictionary covers over 7000 business concepts from 6 categories. This definition and concept has been researched & authored by our Business Concepts Team members.

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