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Economic Value Added as a Management tool

You can read each chapter by clicking the corresponding chapter number. The whole study can also be downloaded as a pdf-file from here.

Table of contents

1 Introduction

    1.1 The objective and motivation of the study
    1.2 The structure of the study
    1.3 Terminology
    1.4 Case-companies and applied conversions

2 Economic Value Added and its characteristics

    2.1 The main theory behind EVA
      2.1.1 The background of EVA
      2.1.2 Market Value Added defined
    2.2 A review of EVA as performance measure and as a yardstick of wealth creation
      2.2.1 The discrepancy in accounting rate of return (ROI) and EVA
      2.2.2 Some evidence on the correlation between EVA and share prices
      2.2.3 Evidence on EVA in management bonus plans
    2.3 EVA as a performance measure in corporate world
      2.3.1 Implications of EVA in corporate control
      2.3.2 The main problems with EVA in measuring operating performance
      2.3.3 How to improve EVA
      2.3.4 EVA and allocation of capital
      2.3.5 EVA vs. traditional performance measures
      2.3.6 EVA vs. other Value-based measures

3 EVA in Group-level controlling

    3.1 A rational definition of EVA in business unit management
      3.1.1 Capital, NOPAT and Rate of return
      3.1.2 Taxes in EVA-formula
      3.1.3 Average cost of capital
      3.1.4 The essence of defining the capital costs accurately
    3.2 EVA in Bonus systems
      3.2.1 Arguments for using EVA in bonus systems
      3.2.2 Characteristics of feasible EVA-based bonus system
      3.2.3 The impacts of EVA's imperfections to bonus system
      3.2.4 Possible EVA-based bonus plans
    3.3 Implementing EVA control inside organization

4 Economic Value Added in case-Group

5 Summary and conclusions