Added value

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Added value in financial analysis of shares is to be distinguished from value added. Used as a measure of shareholder value, calculated using the formula:

Added Value = Price that the product/service is sold at - cost of producing the product

Added Value can also be defined as the difference between a particular product's final selling price and the direct and indirect input used in making that particular product.

The difference is profit for the firm and its shareholders after all the costs and taxes owed by the business have been paid for that financial year. Value added or any related measure may help investors decide if this is a business that is worthwhile investing on, or that there are other and better opportunities (fixed deposits, debentures).

Example[edit]

A retailer, such as a jeweler could present items in an attractive display, create a luxury feel to the shop and offer a gift wrapping service. This could make the customers more willing to pay higher prices as they think that the products are of higher quality.

Other consultancy measures[edit]

For other consultancy measures for shareholder value, see

References[edit]

  • Kay, J. (1993) Foundations of Corporate Success, Oxford: Oxford University Press.