Definition of Added Market Value
Added market value---more commonly known as market value added in the business environment---is a calculation companies use to determine a company's wealth. Three main items make up this calculation: invested capital from outside stakeholders, company debt and company equity. Publicly-held companies are a primary user of this formula.
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Facts
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The market value added formula is market value less invested capital. The market value portion of the formula is the total price a company could earn from its debt and equity. In order to get a true value for the company, the calculation removes invested capital because this represents a liability owed to shareholders.
Purpose
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Companies with high levels of market value added are typically more valuable than companies with lower market value. Investors want to invest in companies who can generate future wealth and will return a portion of the wealth to investors in the form of dividends and higher stock prices.
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Considerations
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Business owners and managers can use the market value added formula to assess their company's performance. Publicly-held companies must release financial information to investors and other business stakeholders, making the comparison process relatively easy.
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