—Profit maximization as a concept is age-old, wealth
maximization is matured and value maximization is today’s
wisdom. Economic Value Added (EVA) is one such innovation.
Unlike traditional accounting measures of performance, EVA
attempts to measure the value that firms create or destroy by
subtracting a capital charge from the cash returns they
generate on invested capital. Besides the measures like Return
on Equity (ROE), Return on Net worth (RONW), Return on
Capital Employed (ROCE) and Earnings per Share (EPS), EVA
is a new measure available to the corporate managers. It
combines factors such as economy, accounting and market
information in its assessment. This paper describes and
compares the EVA with other measures. Apart from this,
taking the real financial data of a company, the paper shows
how EVA calculations can be done to demonstrate whether the
company is adding to shareholder value by generating profits
over and above the capital charge. From the analysis it was
found that EVA is the best appropriate measure for measuring
the value of shareholders.
—Earnings per share (EPS), Economic Value
Added (EVA), Return on Capital Employed (ROCE) and
Return on Net worth (RONW).
Principal, Annamacharya P.G. College of Management Studies,
Rajampet, Kadapa, A.P
AssociateProfessor, Annamacharya, P.G.College of Computer Studies,
Head, Department of MBA, JNTU, Pulivendula, Kadapa, A.P
Cite:Dr. N R V Ramana Reddy, M.Rajesh, and Dr. T.Narayana Reddy, "Valuation through EVA and Traditional Measures an Empirical Study," International Journal of Trade, Economics and Finance vol.2, no.1, pp. 19-23, 2011.