Economic Value Added  Essay example
High school
Essay
Finance & Accounting
Pages 3 (753 words)
Download 0
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…

Introduction

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. ...
Download paper
Not exactly what you need?

Related papers

Essay on Shareholder Value
These dividends form an incentive to the shareholders to hold a company’s stock. Capital gain is the gain that if gotten above an assets original buying price upon disposal. Any realised capital gain forms an investment that has been disposed off as at a profit. An unrealised capital gain may on the other hand refer to an investment which is yet to be disposed off, but would lead to a profit if…
The Strengths, Weaknesses and Uses of the Economic Value Added (EVA) Mode
Economic Value Added (EVA) EVA is a relatively new technique of measuring financial performance of companies. This tool relies on three basic elements which are Net Operating Income adjusted after taxes (NOPAT), the investment amount and the weighted average cost of capital (Hansen & Mowen, 1997). EVA can be calculated as: EVA = After tax operating income – (investment in assets x weighted…
Strenghs, Weakness and Uses of the Economic Balue Added
This paper candidly evaluates the uses of Economic Value Added model in a business as well as its strengths and weaknesses. Uses of EVA EVA is obtained by subtracting the cost of capital from Net Operating Profit After Tax (NOPAT).In this regard, Al Ehrbar (2008) depicts that it is a useful tool for measuring the extent to which value has been lost or added on the business performance. After…
Main Functional Metrics Employed to Measure ShareHolder Value
Many firms calculate the profitability in their own method of calculation where as investors take a different method to do the same, and it makes a hard time for the management of the firm to coordinate the results. An investor always focuses on the economic profits of the firm as well as looks at the extent of debt and equity that is invested in the business. Some of the important financial…
Economic Value Added (EVA) Statement
EVA is one such performance measurement tool that captures the financial profit and shareholders wealth. “EVA subtracts the cost of capital from the net operating profits after tax (NOPAT) generated in the business. It is a measure of the residual income from the income statement after accounting for the cost of the balance sheet” (Economic Value Added, 2007). How can Economic Value Added…
How can Economic Value Added (EVA) statements be used to improve financial statement reporting, results, and success? What are s
By deducting the cost of capital and capital itself from the profit made by a business enterprise, the shareholders are able to know the value created by the capital (and includes debts) they put in the company. It is a given that all business operates under the principle of profit motive, which intends to generate revenue. The practice of Economic Value Added (EVA) however helps the financial…
I. The CEO of the company believes that the company should incorporate fair value accounting from next year while preparing and
The other stakeholders such as employees, suppliers, and stockholders also find fair value accounting more realistic in predicting the trends in business. It is, therefore, easier to ascertain if the business is a going concern concept is on course or otherwise. According to the international accounting standards, fair value refers to the value of an asset or liability, which forms the basis of…