How can Economic Value Added (EVA) statements be used to improve financial statement reporting, results, and success? What are s

How can Economic Value Added (EVA) statements be used to improve financial statement reporting, results, and success? What are s Essay example
College
Essay
Finance & Accounting
Pages 3 (753 words)
Download 0
Name Professor Class Date Economic Value Added (EVA) 1. How can Economic Value Added (EVA) statements be used to improve financial statement reporting, results, and success? To determine how Economic Value Added (EVA) statements can be used to improve financial statement reporting, results, and success it would be necessary to determine what Economic Value Added is, its purpose and why companies are using it…

Introduction

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 reporting of a company’s performance to its investors and shareholders by reporting the rate of return of the investor’s risk taking in the company which enables the investors and shareholders to compare the performance of their investment in the firm vis-a-vis putting it in other investment instruments. Through Economic Value Added (EVA) statements, they are able to determine that their money is creating more value in the company than other mode of investments. On the end of the firm, Economic Value Added (EVA) statements as a financial management system enable its managers to determine how much the company’s capital is used and how much value it creates using the current strategy of the company. ...
Download paper
Not exactly what you need?

Related papers

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…
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…
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…
Financial Statements
The debt amount is recorded as accounts receivable in the company’s books of accounts. The inventory represents items that are being sold in the company’s stores. The inventory also includes unused office supplies, unused cleaning supplies, and other unused items that are owned by the company. The building account is another company asset. Since the company owns the building, the building is…
Financial statements
The documents that constitute the financial statements include the balance sheets, income statements, cash flow statements and the statements of shareholders’ equity (Sinha, 2007). There are some aspects of relationship between these financial records. The three financial records are used to show the financial situation of the company. First, a balance sheet is a financial statement that is used…
Consolidation of Financial Statements
This paper seeks to analyze how the acquisition method compares with the earlier two methods in consolidation of financial statements, its impact on financial statement reporting quality, potential Impact on decision making and International implications of consolidation of financial statements. The paper also discussed the differences between the standards of IFRS and GAAP in respect of…