Economic Value Added: Pros and Cons

Laura Vasilescu and Ana Popa
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Ana Popa: University of Craiova

Finante - provocarile viitorului (Finance - Challenges of the Future), 2011, vol. 1, issue 13, 60-65

Abstract: In times of uncertainty and crisis the performance measurement instruments should be reanalyzed. Thus, alongside the classic indicators of performance, in business financial analysis can be used modern indicators which offer a greater flexibility and efficiency. Such a measurement indicator for financial results closely correlated with the requirement of maximizing shareholder wealth is the Economic Value Added (EVA). The economic value added reflects the real economic profits of a company and it is an effective tool for financial managers. Despite some limits, taking into account the usefulness of EVA indicator, many companies have adopted it as a part of a comprehensive management and at the same time, an incentive system that governs the financial decision-making process.

Keywords: economic value added; financial instrument; performance measurement (search for similar items in EconPapers)
JEL-codes: G30 G31 G39 (search for similar items in EconPapers)
Date: 2011
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Citations: View citations in EconPapers (6)

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