Definition for : Value creation
A company will be able to create Value during a given period if the Return on Capital employed (after tax) that it generates exceeds the Cost of capital (i.e. Equity and Net debt) that it has raised to finance Capital employed. It leads to Enterprise value being higher than the Book value of the Capital employed.
(See Chapters Chapter 14 Conclusion of financial analysis and Chapter 28 investment criteria of the Vernimmen)
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