Implementing EVA

Essay specific features

 

Issue:

Business

 

Written by:

James G

 

Date added:

June 21, 2016

 

Level:

University

 

Grade:

B

 

No of pages / words:

9 / 2248

 

Was viewed:

3052 times

 

Rating of current essay:

 
Essay content:

The value added is any excess of after-tax operating profit minus all the costs of doing business, including the interest cost of debt and the opportunity cost of equity. in other words, EVA is after-tax operating profits, less a capital charge equal to the amount of profit needed to cover interest expense and provide an adequate return for equity investors...
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As such, it is a better measure than earnings or return on net assets (RONA). Earnings growth creates size but does not always equate to share value growth because it may be achieved at excessive capital cost. RONA measures efficiency but not the magnitude of profits, as earnings does. Low returning businesses may invest in projects that increase the average return on capital but earn less than the cost of capital...
displayed 300 characters

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