The Eva Model As A Tool For Performance Measurement

Seminar paper from the year 2004 in the subject Business economics - Controlling, grade: 1,7 (A-), Technical University of Chemnitz (Corporate Accounting and Controlling), course: SBWL - Controlling, language: English, abstract: Since the beginning of the nineties the keyword shareholder value was gaining an immense influence among corporate governance and the published literature on this topic. The traditional measurement of the operational performance based on accounting numbers was under criticism. Earnings basicly were not a reliable indicator. Thus shareholder value and the shareholder value approach broke new ground away from the Accounting Model towards a more dependable one, the Economic Model. Ever since a lot of approaches for the shareholder value have been arisen. The notablest ones were illustrated by Rappaport, Copeland et al. and Boston Consulting Group. Another well known method is the approach brought out by the consulting firm Stern Stewart & Co. Their EVA-model was first mentioned in the book The Quest for Value . Based on the business ratio Economic-Value-Added there was built up a capacious model focusing on three fields of application - EVA as instrument for evaluating a company - EVA as index for financial performance - EVA and the configuration of the corporate governance By the aid of this work I would like to present the EVA model and its application as a tool for performance measurement. In chapter 2 I will give a review on the shareholder value approach. I also will give a short introduction on the discounted cash flow (DCF) of Rappaport as an important method for this approach and some ideas about cash flow return on investment (CFROI) of the Boston Consulting Group and on the method of Copeland et al.. Chapter 3 will lead us towards a short introduction of the EVA concept and then especially to the calculation. Then chapter 4 gives an insight in the application of EVA as an instrument for assessment, a yardstick for financial perf

An updated look at the role of economic profit analysis in the process of wealth creation Grant explains the pivotal role of economic value added (EVA) in the theory of finance, how to measure EVA with standard accounting adjustments, how to use EVA to value companies and their stock, and how to use economic profit principles to identify wealth-creating firms, industries, and even market economies.

Document from the year 2011 in the subject Business economics - Business Management, Corporate Governance, Post Graduate Government College (PGGC-46, Chandigarh), course: Commerce, language: English, abstract: Moullin defined performance measurement as, "Performance measurement is evaluating how well organizations are managed and the value they deliver for customers and other stakeholders". According to Kelvin, 'When you can measure what you are speaking about and express it in numbers, you know something about it'. According to Anon, 'You cannot manage what you cannot measure'. The Economic Value Added (EVA) framework developed by the Stern Stewart & Company is gradually replacing the traditional measures of financial performance due to its robustness and its immunity from "creative accounting". Fortune magazine has called it "today's hottest financial idea and getting hotter" and management guru Peter Drucker referred to it as a measure of total factor productivity. The traditional measures for performance measurement, suffer from some serious limitations which are the main reason that these traditional methods based on earnings can't be used as a reliable measure of performance measurement. Hence, there is the need of new approaches for the performance measurement which takes stakeholder's perspective into consideration and shareholders wealth into consideration. EVA is a better performance measurement tool and it has been proved in the research done on 10 companies in India. EVA has been compared with traditional techniques like ROI, ROE, EPS, NVA and MVA and the results are presented. Suggestive measures have also been given at the end and reference tables are also given. The research will e beneficial for academicians and people associated with finance.

Seminar paper from the year 2008 in the subject Business economics - Business Management, Corporate Governance, grade: A, St. Mary's University San Antonio, Texas, language: English, abstract: In this paper these issues will be discussed: •the main purpose and functions of the financial performance management and how it is related to the problem of shareholders value creation, company growth and managers decision making process and management motivation; •the appropriate measures of management performance from the shareholders point of view; •contradictions or goal incongruence between shareholders, management and company long-term growth.

Best-Practice EVA tells the new EVA story from the ground up. Stewart covers EVA essentials—the classic economic profit version of EVA—in the first three chapters of the book. He shows readers how simple and intuitive EVA really is, how it is defined, and why it is better than all other measures of corporate profit. You discover how it naturally guides managers into making all the right decisions—the ones that will truly maximize value. You see how to use it in profit-sharing bonus plans that create the powerful incentives of an owner. Later, Stewart introduces new ratios that make EVA much more powerful and much easier to use than ever before. The pinnacle of the new ratio framework is EVA Momentum, calculated by taking the change in EVA versus the prior period, and dividing by the revenues in the prior period. It measures the growth rate in EVA, scaled to the sales size of the business. It is the only corporate performance ratio where bigger always is better, because it gets bigger when EVA does, which means it should be every company's most important financial goal, the one ratio metric that everyone aims to maximize as the key measure of corporate success. Stewart then walks through the nuts and bolts of Best-Practice EVA, kicking off with an in-depth look at EVA Margin, or EVA as a percent of sales. It’s a key productivity metric, and Stewart’s candidate to replace ROI. The last link in the Best-Practice program is PRVit—the EVA market score report. Stewart shows how to read and interpret the report, how the score is determined, and why investors are turning to it to screen and rate stocks. He also shows why it is finding a home with CFOs and IR directors who want insights into how the market is pricing their stock. The book concludes with battle-tested tips from the firing line, practical suggestions for how you can test drive and adopt Best-Practice EVA at your company.

Economic Value Added (EVA®) has been a much discussed concept that has assisted in the turnaround of a number of multinational enterprises across the world. It is based upon the theory of ‘economic profit’ that enables companies to capture and create wealth both for themselves and their stakeholders. The strategic decisions of performance and posturing can be grounded upon gaining competitive advantage through mapping economic profits. Existing studies on competitive advantage primarily discuss the meaning, definitions, and sources thereof. However, there are few contributions that discuss how competitive advantage can be measured specifically with respect to Indian companies. This book bridges that gap and advocates that the EVA® can be used to measure and establish the competitive advantage for Indian firms. It is based upon an in-depth study of such companies to explore the extent of use of EVA® in the top BT500 companies in India. It shows that the companies that use EVA® have a distinct competitive advantage over their competitors.

Document from the year 2011 in the subject Business economics - Business Management, Corporate Governance, Post Graduate Government College (PGGC-46, Chandigarh), course: Commerce, language: English, abstract: Moullin defined performance measurement as, “Performance measurement is evaluating how well organizations are managed and the value they deliver for customers and other stakeholders”. According to Kelvin, ‘When you can measure what you are speaking about and express it in numbers, you know something about it’. According to Anon, ‘You cannot manage what you cannot measure’. The Economic Value Added (EVA) framework developed by the Stern Stewart & Company is gradually replacing the traditional measures of financial performance due to its robustness and its immunity from "creative accounting". Fortune magazine has called it "today's hottest financial idea and getting hotter" and management guru Peter Drucker referred to it as a measure of total factor productivity. The traditional measures for performance measurement, suffer from some serious limitations which are the main reason that these traditional methods based on earnings can’t be used as a reliable measure of performance measurement. Hence, there is the need of new approaches for the performance measurement which takes stakeholder’s perspective into consideration and shareholders wealth into consideration. EVA is a better performance measurement tool and it has been proved in the research done on 10 companies in India. EVA has been compared with traditional techniques like ROI, ROE, EPS, NVA and MVA and the results are presented. Suggestive measures have also been given at the end and reference tables are also given. The research will e beneficial for academicians and people associated with finance.