Business, Management and Accounting
8 years ago

Unlocking Profit Potential: How EVA Transforms Performance Measurement and Incentives

1 view
SSRN Electronic Journal
Understanding Economic Value Added
Mihir A. Desai, Fabrizio Ferri, Steve Treadwell

Paper Summary

The article explains Economic Value Added (EVA) and how it is used to measure a company's performance and determine incentive compensation. It shows how EVA is calculated and the adjustments needed in financial statements. A detailed example of EVA measurement is provided, along with different bonus schemes based on EVA. The article discusses both the advantages and limitations of using EVA as a management control system.

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