Which financial term refers to profit minus the cost of capital?

The term that signifies profit minus the cost of capital is Economic Value Added (EVA). This metric specifically measures a company's financial performance by calculating the value created beyond the required return of its investors. EVA is determined by taking the net operating profit after taxes and subtracting the capital charge, which is the cost of capital multiplied by the amount of capital invested.

This approach emphasizes the importance of not just generating profits, but also ensuring that those profits exceed the costs of funding the business. The concept advocates for companies to create real economic profit, not just accounting profit, thereby providing a more accurate picture of a company's financial health and value creation capability.

In contrast, Return on Investment (ROI) is a broader measure that evaluates the efficiency of an investment or compares the profitability of different investments, but does not specifically account for the cost of capital. Net Present Value (NPV) assesses the profitability of an investment by calculating the difference between present values of cash inflows and outflows, and is not directly linked to profit minus cost of capital. Operating Profit reflects earnings from regular operations without considering capital costs, making it distinct from EVA's focus on true economic profit.