Controllership Journal Article Outline - EVA

Running Head : EVA and its Economic Benefits

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JOURNAL ARTICLE OUTLINE

What is EVA , and how can it help your company ' Paul A Dierks and Ajay Patel , Management Accounting Nov 1997 79 , 5 ABI /INFORM Global pg . 52

Economic Value Added (EVA ) is a way of evaluating financial performance by merging the residential concept with modern corporate finance principles

A high EVA is a characteristic of high performance and an organization with such is highly valued

Two constituents of EVA p

NOPAT (after-tax net paying profit , profit obtained after paying tax prior to financing costs and noncash-book keeping entries

Capital charge- the amount of funds that is needed to pay costs to the investors for the riskiness of the business because of the capital invested

RONA (Return on assets ) - the ration between NOPAT and capital after necessary adjustments is another perspective through which EVA analysis

This article elaborates on how to obtain numbers in an EVA calculation and demonstrates the role of EVA and MVA (Market Added Value ) in company operation management , strategy guidance and incentive provision to the employees

MVA DEFINATION CALCULATION OF MVA AND EVA

MVA

The amount of accumulated wealth that a company has created for its investors

It shows whether there is an improvement in a company 's performance the stock amount added to shareholder 's accounts and compares this with the company 's capital investment

MVA and EVA calculation

MVA

Identify the total capital amount taken by a company during its...