...7 Economic Value Added (EVA) 7.1 What is EVA? • EVA ™ is a measure of performance similar to residual income, except the profit figure used is ECONOMIC profit and the capital employed figure used is ECONOMIC capital employed. This is because it is argued that the profit and capital employed figures quoted in the fillclncial statements do not give the true picture and that the accounting figures need to be adjusted to show the true underlying performance. • Th e bCl sic concept of EVA is that performance should be measured in terms of the value added during the period. It is a measure of performance that is directly linked to shareholder wealth. EVA calculation Net operating profit after tax (NOPAT) Less economic value of capital employed x WAee EVA Decision rule: accept the project if the EVA is positive. 7~ ~. VVh ~.t . !~..~.9..~~.r.~................................... 0 • • •••••••••• ••• • COlltrol'(lblePAT Add back non-cash items such as: 8ccollilting depreCiation n O fl-C Cls h expenses interest paid net of tax Add back items that add value such as: qoodwill 8mortisation development and advertising costs operating lease interest cost • ••• • •• • • • • •• ••••• • •• •• •••• • • • •• • x x X X x X X Deduct: econ o mic depreciation impairment to the value of goodwill amortisation of development and advertising costs =NOPAT (X) (X) (X) X •• ...
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...Introduction It is important for every business to measure and evaluate how well it performs in relation to its objectives and goals. The primary goal of every business is to generate value for the business. The desire to achieve these goals directs scare resources to products that are deemed profitable; however, value is generated not only from profitable products but rather through the effective use and management of resources. Value can be viewed as maximizing wealth of shareholders, and or improving the quality of life. The desire for businesses to generate value has resulted in using and developing different performance measurement, sometimes centered on the wrong financial measurement, and strategy. Businesses today only look cash strategies, and sometimes operational goals, and ignore the main reason for existence, which results in rewarding employees and even management for the wrong achievement instead of procedures and strategies that actually added value to the business. If the main goal is to generate value then, it follows that measuring performance must be geared toward this, and not solely on profitability. This paper will discuss the importance Economic Value Added (EVA) in measuring performance of a business. It will also look at how it is calculated and possible disadvantages Definition and History It is normally to see many businesses use the profit base measurement as their primary measure of evaluating the performance of its organization, however, this...
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...CASE STUDY FOR FINANCIAL MANAGEMENT CASE 4: The Battle for Value, 2004: FedEx Corp. vs. United Parcel Service, Inc. VALUE CREATION AND ECONOMIC PROFIT I. OUTLOOK OF CASE 4 Case 4 mentions about the competition between two leading companies in package- delivery market. FedEx which is the largest foreign presence in China, with 11 weekly flights, serving 220 Chinese cities, so the company’s volumes in China had grown by more than 50% between 2003 and 2004. UPS which is the world’s largest package-delivery company and dominant parcel carrier in US, serving 200 cities in 2003. FedEx had virtually invented customer logistical management, and was widely perceived as innovative. Historically, UPS had reputation for being big, bureaucratic and an industry follower. Two companies have their own market, an individual characteristics, and inconclusive. Thus, not only based on the development and operation of the two companies, the analysis also relied on the special purpose financial ratios ( especially Economic Value Added (EVA), an effective measure and rapid for firm within an industry) to find which company has more competitive advantage. II. INTRODUCTION 1. FedEx corporation: [pic] FedEx, formally known as Federal Express, started delivering packages and freight on April 17, 1973. The company was...
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...Jason Coojacinto, Sid Guanio, Kelvin Ong IEFINMT ER1 1. What is EVA? What are the advantages and disadvantages of using EVA as a measure company performance? Economic Value Added (EVA) is basically an estimate of a company’s economic profit. It is known to focus on managerial effectiveness in a year which represents the residual income that is in excess after taking out the cost of all capital not considering the charge for equity capital. An advantage of using EVA to appraise performance is that it takes into account all costs inclusive of the cost of equity capital. The disadvantage faced when using this is the workability of the calculations this require. It is difficult to find the correct cost of equity, EVA is known to be irrelevant for some companies, and lastly is that the EVA value of a big company, which is less efficient than a small company, would still turn out to be greater than that of the small company. 2. Please examine the historical performance of Coca-Cola and PepsiCo in terms of EVA. What trends do you observe? What are the factors behind those trends? What do you think are the key drivers of EVA? Comparing the historical performance of Coca-Cola and PepsiCo with EVA, it seems that the EVA of Coca-Cola is more stable compared to PepsiCo. However, PepsiCo rises faster than Coca-Cola because it’s EVA surpassed Coca-Cola in year 2000 even if it’s EVA from 1994-1997 was negative. Factors behind those trends | Coca-Cola | PepsiCo. ...
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...Research | What are the cultural and economic values of the Basilica of the Holy Blood that the cultural tourists in Bruges attach to? | Tutor: Greetje KrijgsheldGroup: TM2LMembers: a. Tran Huy Thuc: 322938 b. Tran Le Viet Thao: 331287 c. Elena Loredana Sandu: 294594 | 1/14/2015 1/14/2015 Table of Contents Chapter 1: Introduction 3 Introduction 3 Problem statement 3 Overview of the report 3 Chapter 2: Literature review 5 Cultural heritage 5 Basilica of the Holly Blood visitor 6 Needs and demands 6 Cultural values (Intrinsic values) 6 Cultural values subsist the economic value 6 Economic value 7 Direct consumption 7 Indirect consumption 7 Beneficial externality 8 Economic value’s measurements 8 Contingent valuation method 8 Travel cost method 8 Choice modelling 9 Chapter 3: Research design/Methodology 10 Conceptual model 10 Research questions 12 Research method 12 Population and sampling 13 Limitations of the research 13 Chapter 4: Results and analysis 14 Research question 1 14 Research question 2 14 Research question 3 16 Chapter 5: Conclusion and recommendations 19 Appendices 20 Questionnaires matrix 20 SPSS 20 Reference list 26 Chapter 1: Introduction Introduction The Basilica of the Holy Blood is a Roman Catholic basilica in Bruges, Belgium and was originally built in the 12th century as the chapel of the residence of the Count. The uniqueness of the Basilica of Holy Blood lies in its...
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...Abstract Economic Value Added (EVA) is a value based performance measure that gives importance on value creation by the management for the owners. Profit maximization as a concept is age-old, wealth maximization is matured and value maximization is today’s wisdom. Stern Stewart’s EVA raises storm in corporate world and gives a new way to think about rewarding management. Usability of EVA largely depends on the quality of accounting information system, as traditional information system will not provide sufficient information to compute true EVA. Thus, EVA is required to be tailored in line with accounting system, management philosophy and the degree of demand of such a system. In this paper, an earnest effort has been made to explain theoretical foundation of EVA with its origination, definition, ways to make it tailored, adjustments required, scope and some other related issues. The methodology used is a type of theoretical mining of logics resulting a step-by-step process required for EVA implementation. As corporate house plans to move from traditional to value based performance measures, EVA would yield good result and the paper may become helpful to them to comprehend the methodology. Keywords: Value Based Performance Measure, Tailored EVA, Residual Income (RI), Accounting Distortions, Shareholders’ Value, Value Based Measure, Market Value Added, True EVA 1. Introduction Economic Value Added (EVA) is the financial performance measure that comes closer than any...
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...* Tracking the economic value of the embedded technology: Future outlook and trends: The Embedded Digital Technology use in our everyday life is highly significant. To some estimate, around 98% of all the programmable digital devices are in some way embedded which includes the digital devices which embedded under the humans skin. Both current and future studies and trends suggests to a dramatic potential for a much bigger growth. All the future outlooks of this technology points to a much wider use based on both enhanced functionality and cost reduction. “There are now more embedded devices than people on earth. As chips and wireless communications become universal and inexpensive, an enormous potential is created for new applications and novel ways to support our society and people’s lives” said Viviane Reding The former European Commissioner for the Directorate General Information Society & Media. This study by author Geomina Turlia and conducted with the support of European Commission, focused on the inter-linked between macro and micro approach to the technology so it can support the importance of the proposed overall methodology when looking into the economic value of the embedded devices in general. However, it is as important for implementation purposes to also use other supported tools like using a European National Accounts Data so finding the correct economic value can be refined specifically when more needed sectorial or thematic studies can be further conducted...
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...Value-Based Purchasing to Address Failing Markets University of South Florida The healthcare industry, specifically the patients receiving care, have been subjected to a service based industry where they must pay increasing costs for services and customer service has essentially taken a back seat. The implementation of Value-Based Purchasing (VBP), as outlined in the Patient Protection and Affordable Care Act (PPACA), has now addressed this concern. The move from a prospective payment industry to a value based industry is to benefit the patient while holding providers accountable for usage of procedures and tests, and providing increasingly higher quality of care to their patients. Due to the high volume and high expenditures specifically in hospitals, there is a new type of approach being taken when it comes to patient care in acute care settings. The prospective payment system (PPS) was established in the 1980’s in conjunction with Medicare’s Diagnostic Related Groups (DRG) system. This was established due to the rising costs of to the social security administration (Mayes, 2006). During this time hospitals were placed under pressure to accept the new payment system and structure due to an exponential rise in Medicare expenditures. To give perspective on the growth of expenditures to Medicare enrollees, in 1972 Medicare had approximately 21 million enrollees and expenditures approximated $7 billion dollars. In 1982, Medicare enrollees amounted to 30 million and expenditures...
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...The economic value of a law degree “The Economic Value of a Law Degree” from The Journal of Legal Studies, Vol.43, No.2 (June 2014), Michael Simkovic and Frank Mcintyre, suggests a law degree to be more beneficial than a four- year bachelor degree. Primarily focusing on students who have thought of going into law, however, were conflicted due to criticism around, tuition and employment upon graduating. The article conveys with data gathered by various reliable sources suggesting earning a degree in law is a better financial decision than ending with a four -year bachelor degree. Along with data gathered from government agencies supporting higher earnings with a law degree, an 18- year study also suggested lower unemployment rates and disability rates for law degree holders therefore, suggesting a law degree is more beneficial than a four- year bachelor degree. In support of the article, statistics from government agencies such as U.S. Department of Education and U.S. Census Bureau support their claim that law degrees have value over bachelor degrees. Displaying examples of earnings premium even at its lowest with a law degree VS a four -year bachelor degree. Even gathering data from people with law degrees that do not practice law suggest a higher earnings premium. Gathering data from three separate reliable sources the authors were able to support the article with facts. Since the article is aimed at hopeful law students or conflicted students the input of various government...
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...Business Policy & Strategy BUS 490 -- Examination One -Each student will be asked to answer four of the following five questions. You are allowed to use no more than a single sheet of 8.5”x11” paper (one-sided) to answer each question (Four pages in total). You may use an additional sheet of paper for any chart, table, or illustration that would support your answer. Please do not put your name or other form of identification on any of the sheets that you submit. In addition, please do not staple the pieces of paper upon submission. The completed exam is due on October 4, 2013 by 5:00 pm. If you have any questions, please do not hesitate to call. 1) Please define the term economic value in your own words. Next, describe how a firm gains a sustainable competitive advantage other the other members of the strategic group. Finally, explain how two firms that generate different levels of perceived benefit for a product (Firm A generates a high level and Firm B generates a low level) can have the same competitive position. You may use a mathematical formula to support your position. 2) Please describe the general environment for companies that produce confectionary treats (e.g., candy bars). Please use the seven categories that were discussed in class, and have two items for each category. Use may use bullets points and structure the format so that it follows the template for your Individual CEO Project that is on Campus Connect. 3) Please describe the external threats for Barton...
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...Counteracting the global economic crisis: values, institutions, policies. When talking about the broad and complicated subject of economic crisis, it is important to mention ideas concerning neutralization of its consequences and prevention of future calamities. The current disturbance in the global economy requires not only to understand how it was initiated, but also how to counteract and draw conclusions from it. The Chinese proverb says: “may you live in interesting times.” These times are now- financial markets are in turmoil, China is rising as economic power, young people from Europe and America are protesting against, what they see as ineffective government and regulations. In next years the world will change even more- also thanks to changes, that will be made as an answer to the global economic crisis- in terms of values, necessary institutions and policies. The first step toward ending the crisis is to introduce new regulations, that would stabilize the market. Since 1980’s the American financial market has been experiencing a long period of deregulation. Although the obvious results of this move- the example can be the deregulation of savings and loans companies, that led to crisis in 1989, the process continued. Decade later, in 1990’s the new market instruments- derivatives, became increasingly popular. Although, their allies argued that they would stabilize the market, the opposite happened. Any attempt to regulate hedge funds was cut out by Commodity...
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...1. 1995- TWA Flight Wreckage caused an increase in airport security increasing ticket prices and wait time. 2. 1996- The terrorist attack disrupted an international event which generated thousands of business transactions during the Centennial Park Bombing. 3. 1997- President Clinton barred federal funding for any research on human cloning. This would slow the introduction of new medicines developed from human cloning research. 4. 1998- iMac was launched in 1998 and today it has become one of the most popular desktop computers in the world. 5. 1999- Mobile wireless file sharing came into the picture with the invention of Bluetooth technology. It was not fast like cable transfers, but it was a major step towards mobile data sharing and was immensely popular for wireless headsets. 6. 2000- Trek Technology and IBM began selling the first USB flash drives commercially in 2000 that changed the way the world stored information. 7. 2001- September 11, 2001 terrorist attacked the World Trade Center and the Pentagon. This major event created much uncertainty in the stock market. 8. 2002- Starbucks entered into licensing agreements with National Fair Trade organizations to sell Fair Trade Certified coffee in countries where Starbucks does business. 5,886 stores were opened this year. 9. 2003-Invasion of Iraq Operation “Iraqi Freedom” commences. This generated uncertainty over the Middle East oil supplies. 10. 2004- Created in 2004, Facebook became the world’s largest social network...
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...regulate economic growth and development across every economy. As a result, governments across the world impose one form of tax or the other. The main purpose of imposing tax has been for the government concerned to use the proceeds of the taxation to run the government and to provide essential services. Before a country considers efficient and effective way of administering tax system; it must possess a clear picture of the scope of its tax system as well as considering the tax rate and tax base over time. The quantity and quality of revenue required by tax administrators are to a large extent determined by the type of tax system which is introduced. A nation’s tax goals are not achieved by designing a tax system which is fair, any fair system which is not administered as planned becomes inequitable. Thus, a good tax system is capable of financing the necessary level of public spending in the most efficient and equitable way possible. It should also (1) raise enough revenue to finance essential expenditures without recourses to excessive public sector borrowing, (2) raise the revenue in ways that are equitable; that minimized its disincentive effects on economic activities, (3) do so in ways that do not deviate substantially from international norms. (Tanzi and Zee,2000). It is being noted that the aims and objectives of taxation differ from one country to the other. However, an essential common feature of tax has been the dynamic nature in every system to reflect the economic and...
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...The Impact of Vat on the Economic Growth of Bangladesh CONTENTS * Introduction * Objectives of the study * Salient features of Bangladesh’s current tax system * Growth trends and revenue structure of Bangladesh * Contribution of direct and indirect taxes to revenue * Reasons for introducing vat in Bangladesh * Ratio of VAT to Revenue & VAT to Tax * Revenue Structure during Pre and Post VAT Regime * VAT Rates in Selected Countries * VAT Productivity in Selected Countries * Some Important Features of VAT in Bangladesh * Tax Base for VAT * Arguments For VAT * Arguments against VAT * Reforms in VAT: Current Initiatives Introduction: Value Added Tax (VAT) is imposed on value added by a manufacturer of a firm or distributors. Value added tax means a tax on the amount by which the value of an article has been increased at each stage of production. It is a multistage consumption tax imposed on goods and services, which is collected at every stage of production and distribution rather than at the retail stage alone. Objectives of the Study: We can gain knowledge about the tax system (especially VAT) of Bangladesh by studying this topic. As following aspects of tax we can learn from this study: 1. To present an overview of tax system of Bangladesh. 2. To evaluate Govt. Performance in collecting revenue. 3. To identify the effect of the tax system (especially VAT) to economic development of Bangladesh. 4. To identify...
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...CAPITOLUL II. VALOAREA ECONOMICĂ ADĂUGATĂ (EVA) ………………………… 8 1. Valoarea economică adăugată şi managementul bazat pe valoare ………………….. 8 2. Implementarea sistemului EVA ……………………………………………………. 11 3. Calculul valorii economice adăugate ………………………………………………. 15 4. Factorii determinanţi ai valorii economice adăugate ………………………………..20 5. Model de analiză a valorii economice adăugate …………………………………… 23 6. Avantaje și limite ale valorii economice adăugate …. ……………………………...25 7. Îmbunătăţiri ce ar putea fi aduse metodei …………………………………………...29 BIBLIOGRAFIE I. NOȚIUNI INTRODUCTIVE PRIVIND MANAGEMENTUL BAZAT PE VALOARE I.1. Nevoia apariției managementului bazat pe valoare Pe măsura dezvoltării în timp a companiilor, mediul economic și concurenţial a devenit tot mai complex şi activitatea firmelor s-a diversificat fiind nevoie de noi instrumente şi tehnici manageriale mai performante care să permită firmelor să depăşească obstacolele din ce în ce mai numeroase şi mai costisitoare. În acest context, managementul tradiţional, bazat pe analiza şi interpretarea datelor contabile, şi-a dovedit incapacitatea de a evalua şi de a exprima, într-o manieră cât mai clară şi cât mai corectă, performanţele reale ale companiilor. Astfel, s-a impus o schimbare în atitudinea managerilor. Aceştia tind să mute accentul dinspre maximizarea veniturilor întreprinderii înspre maximizarea valorii create pentru acţionari, dinspre folosirea cu precădere a datelor contabile înspre folosirea...
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