New Trends In Measuring Financial Performance: Economic Value – Added (eva)

Traditional measures of corporate performance are many in numbers. But it is argued that, in general, these measures fail to identify the true surplus. Economic Value Added (EVA) is advocated as a new measure of corporate performance that focuses on clear surplus in contrast to the traditionally used profit based indicators. Economic Value Added represents a powerful business tool which, if used correctly, promises to improve firm performance and produce greater returns to shareholders. EVA is not just another performance measure, but can be the main part of an integrated financial management system, leading to decentralized decision making. Thus, the adoption of EVA should indirectly bring changes in management, which in turn can enhance firm value.