StudentShare solutions
Triangle menu

Economic Value Added - Essay Example

Nobody downloaded yet

Extract of sample
Economic Value Added

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. This frees the corporation from spending more time in establishing ways to raise EVA but able to produce additional shareholder value according to Albrecht, Stice, Stice and Swain (2010). EVA creates a common language for decision making particularly long-term decisions which are important in improving the results and success of a corporation. For instance, it can be used in resolving budgeting problems and assessing the performance of organizational elements and directors in order to determine the end result .EVA quantification of results in terms of finance also aids in strengthening other management programs such as customer development, TQM and quick response by demanding and getting constant financial improvement as stated by Reynolds and Cuthbertson (2004). Thus in order to make EVA useful in attaining improved financial statement reporting and success, managers and workers need to espouse long-term focus and start to think like owners of the business. This way they will make them feel responsible for and participate in the economic value of the corporation leading to improved results. For improved success, EVA can be connected with an incentive award system. In such a way, EVA can provide a measure to calculate success and a medium for continued performance improvement. Since EVA is computed on an accounting period, it allows employees to plot progress during the year and this can help in improving on the end result thus a success. According to Shelo64 (2012), a transition to EVA measurements entails serious obligation of the board of directors and the senior management to utilize the measures in managing the business for an improved financial statement reporting, results and success. In addition, every individual should buy into the plan in order to make it successful in such improvements. An extensive training and communication for everyone in the company is also required for using EVA to achieve such improvements. Problems of EVA One of the problems with EVA is that it does not provide an account for authentic options or growth opportunities intrinsic in the investment decisions as stated by Schon (2007). Additionally, it does not reflect the perception of the market on the value of growth ...Show more


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…
Author : rbernhard
Economic Value Added essay example
Read Text Preview
Save Your Time for More Important Things
Let us write or edit the essay on your topic
"Economic Value Added"
with a personal 20% discount.
Grab the best paper

Check these samples - they also fit your topic

The effect of Value-Added Activity Based Costing and Economic Value Added Measure and their impact on Process Improvement & Busi
The consumption based approach in this process lends interplay of the scientific approach to the process strictly on the basis of cause-and-effect relationship to the processes, rather than ’ guestimation’ (guess and estimation) in the process of allocation and apportionment, with the underlining principle of ‘traceability’.
4 pages (1000 words) Essay
The Strengths, Weaknesses and Uses of the Economic Value Added (EVA) Mode
The purpose of this article is the critical evaluation of the strengths and shortcomings of Economic Value Added (EVA). This paper also outlines some of the uses of Economic Value Added (EVA) and its contribution in facilitating the financial managers in taking different sorts of decisions regarding mainly the performance of employees.
7 pages (1750 words) Essay
Strenghs, Weakness and Uses of the Economic Balue Added
Basically, shareholders and other investors are more interested in EVA since it depicts the actual returns that a company makes after the cost of financing the company’s capital is deducted. In order to obtain the economic profits, the cost of capital must be less than the return on the firm’s capital employed.
6 pages (1500 words) Essay
Describe the methods used to calculate value added. How does value added contribute towards understanding the connections betwe
There are several ways to calculate value added some of the ways are explained below. Value added= total labor expense + operating profit (in terms of cash) The first component if the cost and expenditures involved in hiring, wages of the workforce and difference allowances for the work force.
6 pages (1500 words) Essay
Describe the methods used to calculate value added. How does value added contribute towards understanding the connections betwee
It is particularly after the World War II that the United Nations went farther to develop standardised national value-added concept calculations. Value added is described as the measure of performance of a given economic entity.1 This paper describes the methods that are used to calculate the value added and the connection that a business has to its markets with respect to value added concepts.
5 pages (1250 words) Essay
How can Economic Value Added (EVA) statements be used to improve financial statement reporting, results, and success What are s
The use of Economic Value Added (EVA) statements enable companies to determine if the company is earning or not. This is determined in the Economic Value Added (EVA) statements by deducting the cost of financing the company’s capital or cost of money from the profit or revenue made by the company.
3 pages (750 words) Essay
Balance Score card (BSC), Beyond Budgeting and Economic value added (EVA)
It not only turns out to be highly supportive in respect of estimating and evaluating the performance of the staff members, but also the scorecard leads towards the determination
4 pages (1000 words) Essay
Strengths, weaknesses and uses of the Economic Value Added
In order to obtain the economic profits,the cost of capital must be less than the return on the firm’s capital employed.This paper candidly evaluates the uses of Economic Value Added model in a business as well as its strengths and weaknesses.
6 pages (1500 words) Essay
How can Economic Value Added (EVA) statements be used to improve financial statement reporting, results, and success What are some problems found with EVA
In many ways the EVA statements tend to improve the financial performance of the business (Brealey et al, 2011). This Economic Value Added is often
3 pages (750 words) Essay
Describe the methods used to calculate value added. How does value added contribute towards understanding the connections between the business and its product markets
Benefit of a firm is the accumulation of all its transactions, like equity and dues of the firm. An extensive market benefit is advantageous for an organization. It implies the business has created benefits for its shareholders. Similarly, reduced added market value implies
5 pages (1250 words) Essay
Hire a pro to write
a paper under your requirements!
Win a special DISCOUNT!
Put in your e-mail and click the button with your lucky finger
Your email
Comments (0)
Click to create a comment
Let us find you another Essay on topic Economic Value Added for FREE!
Contact us:
Contact Us Now
  • About StudentShare

  • Testimonials

  • FAQ

  • Blog

  • Free Essays
  • New Essays
  • Essays

  • The Newest Essay Topics
Join us:
Contact Us