Economic value added (EVA): its uses and limitations.: An article from: SAM Advanced Management Journal

This digital document is an article from SAM Advanced Management Journal, published by Society for the Advancement of Management on March 22, 1999. The length of the article is 4581 words. The page length shown above is based on a typical 300-word page. The article is delivered in HTML format and is available in your Amazon.com Digital Locker immediately after purchase. You can view it with any web browser.

From the supplier: Economic value added (EVA) is a financial performance measure that is increasingly becoming popular. The formula for the computation of EVA requires the subtraction of the product of investment in assets and weighted average cost of capital from operating income after taxes. A company with a positive EVA can be said to have created wealth while one with a negative EVA has consumed capital. The main strength of the EVA is that it offers an indicator of wealth creation that aligns the goals of plant or division managers to the general corporate goals. However, it also has certain limitations, particularly when it comes to size differences, financial orientation, short-term orientation and results orientation. In light of these shortcomings, managers would do well to complement EVA with other financial measures to create a balanced pool of measures that cover all performance areas relevant to the success of the organization.

Citation Details
Title: Economic value added (EVA): its uses and limitations.
Author: Peter C. Brewer
Publication:SAM Advanced Management Journal (Refereed)
Date: March 22, 1999
Publisher: Society for the Advancement of Management
Volume: 64 Issue: 2 Page: 4(8)

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