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Economic Value Added - Essay Example
Finance & Accounting
Pages 3 (753 words)
Economic Value Added (EVA) Name: Institution: Economic Value Added (EVA) Statements Used To Improve Financial Statement Reporting, Results, and Success The Economic value- added as a corporation perspective is an essential tool for investigating financial statements…
Thus it requires managers and employees to focus on how capital is utilized and how it generates cash an important idea for all investor analysis of a corporation. There is usually a common goal for all corporations which are to obtain capital and earn a return rate exceeding that of the capital. In order to achieve this goals EVA measure the amount of money left after deducting the capital thus providing a financial statement reporting. EVA can be used to determine whether an corporation is accountable for economic outlays whether they are on the balance sheet, income statement or in the financial statement. This is because this tool creates a financial statement that consists of all the cost of being in the corporation while giving managers an account of every dollar used. There are two gains from focusing on the growth of EVA in a corporation. On one hand, the attention of the management is more focused towards its main responsibility which is to raise investor’s assets. Ion the other hand, deformation resulting from the utilization of historical cost accounting data is eliminated or decreased to ensure that managers spend their time finding means to raise EVA. Therefore, the raised awareness of the effective use capital eventually creates additional shareholder value. ...
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