The EVA Economic Value Added is a performance measure based on value, which arises by comparing the profitability obtained by a company with the cost of the resources managed to achieve it. If the EVA is positive, the company creates value (it has generated a return greater than the cost of the resources used) for the shareholders. If the EVA is negative (the profitability of the company is not enough to cover the cost of capital), the wealth of the shareholders suffers a decrease, destroys value. This document presents an approach to a next-generation management tool, the create china phone number Value Added (EVA) and Value-Based Management (GBV).
The Economic Value Added
A component for the valuation of companies has been attached to EVA, the Market Value Added (MVA), which can be defined as the difference between the total market value of a company and the total resources invested (capital) for it. create that value to any date. If the MVA is positive, the company has created value, while if it is negative, it has destroyed it. EVA has some benefits that other indicators, such as Return on Investment (ROI), Earnings per Share (EPS) and other traditional ones do not. One of them is that it incorporates the risk factor in its measurement procedure, it also reflects corporate performance in absolute terms; In addition, its concept is simple, which is why its transmission and understanding at all corporate levels is simplified, when compared to other measures based on value.
Enabling Business Leaders to create value
The ABC-EVA system mixes the Activity Based Costing (ABC) method with EVA. It is a management tool that helps manage costs and capital successfully, enabling business leaders to create value by refining the cost structure. In this system, the cost of activities not only includes the rate of consumption of resources, as in traditional ABC, but also includes the demand for capital. Apart from those already mentioned, EVA, MVA, GBV, ABC, there are other terms that are very significant, they are: capital, rate of return on capital, NOPAT, weighted average cost of capital, present value of future EVAs , value drivers, compensation DV Leads, performance indicator, cost drivers.