Economic Value Added (EVA) measures whether the operating profit is sufficient enough to cover cost of capital. Shareholders must earn sufficient returns for the risk they have taken in investing their money in company’s capital. The return generated by the company for shareholders has to be more than the cost of capital to justify risk taken by the shareholders. If a company’s EVA is negative, the firm is destroying shareholders wealth even through it may be reporting positive and growing EPS or return on capital employed. EVA is just a way of measuring an operation’s real profitability. EVA holds a company accountable for the cost of capital it uses to expand and operate its business and attempts to show whether a company is creating a real value for its shareholders.