arvonlisästä

Arvonlisä, often translated as value added, refers to the increase in the value of goods and services as they pass through the production process. It is the difference between the value of a company's output and the value of the intermediate goods and services it purchases from other firms. In essence, it represents the wealth created by a business or an economy.

The concept of value added is crucial in national accounting, particularly in calculating Gross Domestic Product (GDP). GDP can be measured using the expenditure approach, the income approach, or the value-added approach. The value-added approach sums the value added at each stage of production across all industries in an economy. This avoids double-counting, as the value of intermediate goods is subtracted, ensuring that only the final value of goods and services is counted.

Businesses also use value added to assess their own performance and efficiency. A higher value added indicates that a company is effectively transforming inputs into more valuable outputs, contributing more significantly to economic output. For example, a baker adds value by purchasing flour, eggs, and sugar (intermediate goods) and transforming them into bread and pastries (final output). The difference in value is the baker's contribution to value added. This concept is fundamental to understanding economic activity and the creation of wealth.