EVA

Paper Summary:

This paper discusses economic value added (EVA), which is a performance measure developed by Stern Stewart & Co to measure the true economic profit produced by a company. It describes the formula for EVA and provides an example of how it would be calculated. The paper then describes the uses and advantages of using EVA for a business.

From the Paper:

"EVA is a tool that is easily used by corporate executives to determine and justify to their investors and shareholders expenditures that may boost the bottom line without demonstrating a practical or traditional use. This is necessary in this age where technology-based and high technology-use corporations need to purchase software or systems that have not been utilized, yet promise high yield. It is also an instrument by which economic profit may be calculated by taking a company's net after tax operating profit and subtracting from it the product of the company's invested capital multiplied by its percentage cost of capital. This provides a standardized measure for the profits the company generated and helps the company determine future expenditures."

Sample of Sources Used:

• Chang, Pao-Long and Chien, Chen-Fu. "Managing Technologies to Enhance and Enrich Services in High-Tech Industry." Research-Technology Management. Mar.-Apr. 2004. (Services and Management. Vol. 4. Nos. 4-6, 2003: 209)
• Coleman, B. Jay. "Evaluating Internal Operations and Supply Chain Performance using EVA and ABC." SAM Advanced Management Journal. Spring, 2005: 95-97.
• "Enerwise Offers New Technology to Measure Energy." Real Estate Weekly. August 114, 2002.
• Goss, Ernest. "The Internet's Contribution to U.S. Productivity Growth: Putting Some Rigor Into the Estimates. Business Economics. Oct. 2004: 51.
• Gottlieb, Mark. "Continental Drifter - Two Bites To the Dollar." Industry Week. Nov. 2, 2005: 20.

More papers on EVA:

• Analytical Essay # 29757 : "Economic Value Added (EVA)"
• Article Review # 149990 : "The Benefits of Economic Value Added (EVA)"
• Research Paper # 118668 : "Economic Value Added (EVA)"

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