MANAGEMENT AND ANALYSIS OF FINANCIAL ADDED VALUE BASED ON ECONOMIC PRINCIPLES

Melania Elena Miculeac
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Melania Elena Miculeac: Dragan”European University of Lugoj Faculty of Economics

Annals of University of Craiova - Economic Sciences Series, 2012, vol. 3, issue 40, 118-127

Abstract: Financial consulting agencies and stock markets, generally, have used lately new approaches to measure company’s economical and financial performances. The principle that lays at the basis of these new approaches is represented by the creation of value for shareholders, the increase of their value, but not in any conditions. The accent is laid on the source of the new value that was created, on the value quality and, especially, on the risk taken, the traditional measures of performance being replaced by the term financial value added. From the category of financial added values the most frequently used for evaluating management performances is the economic value added, which has a significant impact on the organizational behavior. Economic value added is superior to any traditional measure used to evaluate value or performance because it recognizes the cost of invested capital and implicitly through it relates to the risks of a commercial company’s activity. The objective of maximizing economic value added is the consequence of a financial strategy, while the maximization of measures based on profitability may lead sometimes to unwanted situations. In this paper I proposed a model of factorial analysis of the economic value added which includes the key factors for creating economic value added. The main advantage of this model is represented by the identification of growth engines for economic value added.

Keywords: financial added value; residual profit; economic value added; average cost of invested capital; operating cash flow (search for similar items in EconPapers)
JEL-codes: G32 M41 (search for similar items in EconPapers)
Date: 2012
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Persistent link: https://EconPapers.repec.org/RePEc:aio:aucsse:v:3:y:2012:i:40:p:118-127

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