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Value added (management performance)

Value added in a management performance or incentive measure commonly represents sales or output value less bought-in goods and services, with the precise scheme definition stated. It can show the value available to employees, providers of finance and other claims, but is not the same as profit, cash flow or economic value added. For rewards, the calculation may need adjustment for inventory and pricing effects and should reflect what employees can influence.

Worked example

Sales are $500,000 and the scheme deducts $200,000 bought-in materials and services, giving a $300,000 value-added base before labour and other claims.

Common mistake

Do not confuse this measure with EVA’s profit-after-capital-charge calculation or assume every scheme defines bought-in costs identically.

Where it appears in your exams

QualificationExamRelationshipPeriod
ACCA APM Supporting September 2026–June 2027
ACCA MA Supporting September 2026–June 2027
FIA FMA Supporting September 2026–June 2027