Total Value Addition mystery

Dear Veterans,

Plz help me to understand "Total Value Addition" term and how to calculate it.

It is mostly available in all moneycontrol balance sheet. Though I googled to get some info, but I am not satisfied.

Thanks in advance!!

value addition, in simple terms is, value added to raw materials to make it into finished goods. normally, the formula is turnover MINUS cost of direct materials.

Dear rvm123,

Thanks for the clarification, but I could get the value which is mentioned in the following 'Total Value addition' by your formula ..

http://www.moneycontrol.com/financials/ttkprestige/profit-loss/TTK02

If I do Turnover - raw material cost for the above, it's different

here they have used the formula value added = total expenses minus raw material cost.

How would we equate between sales outoutput minus raw materials cost vs total expenses minus raw materials cost. Can both be expressed as total value addition

In the above link, the formula used is Total value addition = Total Income (-) Raw Materials (-) PBDIT. i.e., 1411.50 - 828.30 - 208.45 = 374.75.

Total expenses (-) Raw Material also will give the same result. 1203.05 (-) 828.30 = 374.75

Total expenses include all the expenses (including material cost) incurred (value added by the company) to bring the raw material into finished product. Hence, total expenses MINUS raw material cost is considered to be the value added by the company.

Thank you for the clarification. Could you please refer any book or article where these different computations are discussed in details.

you can try investopedia. In any finance books, the term value added will be available, becuase it is a very common and very fundamental parameter.

My understanding is Value addition is computed as; total output or sales minus total input or total expenses: expression of value addition as total expenses minus raw materials cost without considering the output is somewhat not clear to me:

if you take the moneycontrol link provided in the earlier message dated 29.1.2011, both the formulae provided by me in yesterday's message may be verified.

If u want to consider the output value, first formula Total value addition = Total Income (-) Raw Materials (-) PBDIT holds good. Here, total income is nothing but the Turnover / output value, etc., in whichever name we may call.