engleski

The Potential and the Most Common Problems in the Calculation of Economic Value Added

Economic value added (EVA) is the modern and the most common value based financial performance measure applied by large multinational companies as well as listed companies at global capital market. The concept of economic value added is developed by Stern Stewart consulting company which trademarked it. The main objective of EVA is to measure economic profit of a company eliminated from the concepts and requirements of certain financial reporting standards which may distort the true profit of a company. Therefore, EVA is a measure that indicates the increase or decrease in wealth of shareholders generated by the company. The implementation and application of EVA is a result of modern neoliberalism paradigm in corporate world characterised by shifting from the concept of profit maximization to the maximization of the shareholders’ value. EVA is simply calculated by deducting the cost of capital from net operating profit after tax. So, there are three key elements for EVA calculation and these are net operating profit after tax, capital invested and the percentage of weighted average cost of capital. Weighted average cost of capital should be calculated using the CAPM model. The main purpose of this paper is to examine the potential problems of EVA calculation among Croatian companies.

company performance; EVA; problems in calculation of EVA

nije evidentirano