Definition 1
The value added in each and every stage of production is accumulated and added to the value of the total output; that is less often the case with the value of intermediate products (including capital equipment, raw materials, and other supplies).
By definition, value added is ascribed to the various factors of production (including the wages paid to workers, the profit paid to the company owners, and interest paid to lenders). Value added in the total economy of a nation equals its gross domestic product (GDP).
Definition 2
It is the additional value (such as convenience, brand name, technology etc.) of a basic product for which customers are willing to pay extra. That is the added value of the product that increases its total value.
Value Added = Total Revenue - Intermediate Consumption
Types of Value Added
There are a few major types of value added and they are -
- Gross (the value of the goods produced in a certain area or industry of any economy)
- Economic (the additional value created as an excess of the required return)
- Market (the market value of any business and the capital invested)
- Cash (the ability of the business to generate cash flow beyond the required return)
Use the Term in Sentences
- The consumers pay the value added taxes for the consumer products.
- Businesses backed up by strong branding are big on creating major value added benefits and draw profit.