An editorial discussing the value of quality in a corporation's product, states that in the U.S., "quality' is too often a mantra without meaning - an empty promise... that bears no relation to the physical reality of the goods produced." The article goes on to suggest that there are inherent values in quality that can be factored into a company's bottom line, that, compared to other countries' output of quality products, American manufacturers ignore one of the most obvious principles of global business is that when engineering, R&D, quality control and personnel budgets are cut to save a few dollars, the bottom line suffers, because of the principles of EVA: there are factors that need to be determined and figured in when looking for future gains (Gottlieb 20).
Jay Coleman (95) spends many pages convincing the reader that firms cannot exist in isolation and that supply chain partners' success directly affects their own. In this article, Coleman determines that firms should look internally and combine EVA with ABC (Activity-Based Costing) to analyze operations and come out with the highest value-added for the end customer and for superior competitive positions for the firm.
Corporations are advertising to their shareholders that they are adding systems to assist in administrative processes that are interactive with various departments for efficiency. These value-added services are justified beforehand to investors and shareholders in order to boost confidence in the corporation's purchases and eventual benefits of those purchases. This has the effect of increasing the value of the stock (Enerwise 2002)
Goss promotes EVA use to justify the use of the Internet in one company's expenditures (51), while Chang and Chien describe 16 ways to enhance and enrich services in the high-tech industry (209).
EVA is a tool that is easily used...
Economic Value Added (EVA) Accounting Practice Although Economic Value Added (EVA) is not a new concept in economics and financial theory and is based on the 19th century concept of "economic profit," it has only been widely adopted recently by business firms as an accounting practice. In this paper we shall describe what EVA is, and look at its pros and cons from the point-of-view of the company adopting the practice
The absence of these however does not detract from the general value of the article, or from the proof of the premise. Furthermore, it could also be acknowledged that the factors described, other than EVA, are already well-known in accounting, and do not need a clear explication of both strengths and weaknesses. Another factor in favor of the article and its premise is the fact that the authors acknowledge the
However, EVA is neither as perfect as claimed by its advocates, nor is it the only performance measure that suggests a path to a superior stock return" (emphasis added) (p. 319). More importantly, though, while the economic value added measurement approach to financial performance may not be without its detractors, the scholarly literature is consistent in emphasizing the need for such initiatives for companies to remain competitive in an increasingly
Economics Economic Value Added Economic Value Added is an analytical tool which was developed in 1982 by Joel Stern and G. Bennett Stewart and has been widely accepted as a means of measuring a company's real profitability. This tool is unique because it involves calculating "the firm's residual profitability, net of both the direct cost of debt capital and the indirect cost of equity capital." (Grant, p. 2) Debt capital can
Value-Based Management (VBM) is a management philosophy that aims to achieve superior results (Niedell, 1996). This process measures performance by the value that is returned to shareholders. Successful implementation of VBM requires a successful change in corporate culture, as well as the adoption of VBM concepts at all levels and functions within an organization. VBM includes an integration of performance measurement, compensation, strategic planning, training, and communication (Porter, 1986). The
Economic Value Added Statements Improve Financial Reporting There are many potential advantages of using Economic Value Add analysis to improve financial reporting, results and increase the probability of success for specify investment initiatives and programs. There are also limitations or problems with this technique as well, which are briefly described in this analysis. Analysis of Earned Value Added (EVA) In defining EVA, the equation used for calculating it is based on the
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