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Value Added

What is 'Value Added'

Value-added describes the enhancement a company gives its product or service before offering the product to customers. Value-added applies to instances where a firm takes a product that may be considered a homogeneous product, with few differences (if any) from that of a competitor, and provides potential customers with a feature or add-on that gives it a greater sense of value.

Explaining 'Value Added'

A value addition can either increase the product's price or value. For example, offering one year of free support on a new computer would be a value-added feature. Additionally, individuals can add value to services that they perform, such as bringing advanced financial modeling skills to a position in which the hiring manager may not have foreseen the need for such skills.

Strong Branding

Companies that build strong brands add value just by adding their logo to a product. Nike Inc. can sell shoes at a much higher price than some competitors, even though their production costs are similar. The Nike brand, which shows up on athletic apparel and uniforms of the top college and professional sports teams, represents a quality enjoyed by elite athletes.

Superior Service and Additional Features and Benefits

Buyers of luxury cars from BMW and Mercedes-Benz are willing to pay a premium price for their vehicles because of the ongoing maintenance programs that the companies offer.


Further Reading


The effect of venture capital financing on the economic value added profile of Nigerian SMEs
papers.ssrn.com [PDF]
This study examines the use of venture capital (VC) financing for small and medium-scale enterprise (SME) development in Nigeria by comparing the economic value added (EVA) of venture capital-backed SMEs and those of non-venture capital-backed SMEs. Three …

Predicting corporate bankruptcy and financial distress: Information value added by multinomial logit modelsPredicting corporate bankruptcy and financial distress: Information value added by multinomial logit models
www.sciencedirect.com [PDF]
This study examines the use of venture capital (VC) financing for small and medium-scale enterprise (SME) development in Nigeria by comparing the economic value added (EVA) of venture capital-backed SMEs and those of non-venture capital-backed SMEs. Three …

Economic Value Added as a measurement tool of financial performanceEconomic Value Added as a measurement tool of financial performance
www.sciencedirect.com [PDF]
This study examines the use of venture capital (VC) financing for small and medium-scale enterprise (SME) development in Nigeria by comparing the economic value added (EVA) of venture capital-backed SMEs and those of non-venture capital-backed SMEs. Three …

Financial performance in Finnish large-and medium-sized sawmills: The effects of value-added creation and cost-efficiency seekingFinancial performance in Finnish large-and medium-sized sawmills: The effects of value-added creation and cost-efficiency seeking
www.sciencedirect.com [PDF]
This study examines the use of venture capital (VC) financing for small and medium-scale enterprise (SME) development in Nigeria by comparing the economic value added (EVA) of venture capital-backed SMEs and those of non-venture capital-backed SMEs. Three …

Venture capitalist governance and value added in four countriesVenture capitalist governance and value added in four countries
www.sciencedirect.com [PDF]
This study examines the use of venture capital (VC) financing for small and medium-scale enterprise (SME) development in Nigeria by comparing the economic value added (EVA) of venture capital-backed SMEs and those of non-venture capital-backed SMEs. Three …

Accounting in its social context: towards a history of value added in the United KingdomAccounting in its social context: towards a history of value added in the United Kingdom
www.sciencedirect.com [PDF]
This study examines the use of venture capital (VC) financing for small and medium-scale enterprise (SME) development in Nigeria by comparing the economic value added (EVA) of venture capital-backed SMEs and those of non-venture capital-backed SMEs. Three …

An analysis of financial performance using the EVA methodAn analysis of financial performance using the EVA method
ideas.repec.org [PDF]
This study examines the use of venture capital (VC) financing for small and medium-scale enterprise (SME) development in Nigeria by comparing the economic value added (EVA) of venture capital-backed SMEs and those of non-venture capital-backed SMEs. Three …



Q&A About Value Added


What does "feature" mean?

A feature is an additional part or aspect added onto something else."

How do you make something more valuable?

You enhance its features so it has more worth than other products like it."

What does compensation of employees represent in business terms?

Compensation of employees represents a return to labor plus earnings before taxes, representative of a return to capital.

Can you give examples of how companies provide more worth through features?

Yes! One example could be providing one year of free support on your new computer purchase."

What is value added?

Value added is the contribution of factors of production to raising the value of a product and increasing the income of those who own said factors.

What does "enhancement" mean?

Enhancement means improvement or betterment in quality or condition; upgrade; enrichment; intensification; heightening; strengthening."

How do you calculate value added?

You calculate value added by tabulating unit profit, unit depreciation cost, and unit labor cost per each unit sold.

What is Value Added?

Value-added describes the enhancement a company gives its product or service before offering the product to customers.

What does total value added represent?

Total value added represents revenue minus intermediate consumption.

What are integrated companies?

Integrated companies are manufacturing companies that produce their own goods and services instead of buying them from other businesses or individuals.

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