Value Creation Index

What is Value Creation Index?

The value creation index (VCI) is a measure of the value that a company creates for its shareholders. It is calculated by dividing the company's economic profit (also known as economic value added or EVA) by its invested capital. The VCI is often used as an alternative to traditional financial metrics, such as return on investment (ROI), as it takes into account the cost of capital and the level of risk involved in a company's operations.

The VCI is typically expressed as a percentage, with a higher percentage indicating that a company is creating more value for its shareholders. A company with a high VCI is generally considered to be more efficient and successful at creating value than a company with a low VCI.

There are several factors that can impact a company's VCI, including the efficiency of its operations, the quality of its products or services, the strength of its market position, and the level of competition in its industry. Companies with strong brands, innovative products, and efficient operations are typically able to generate higher VCIs.

Overall, the VCI is an important tool for investors and analysts to use when evaluating the performance of a company and its ability to create value for shareholders.

See Also

Return on Investment (ROI)