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ECONOMIC VALUE ADDED

What is this practice and how effective is it?

Economic value-added (EVA) models, if well implemented, will encourage managers to act like owners and consider their decisions in the context of whether they will increase shareholders’ wealth. Accounting profits have proved time and again to be a poor indicator of future success. Remember Enron, WorldCom, and Tyco? EVA goes a long way toward meeting some of the criticisms of published accounting information. But for some managers, its concepts are challenging and difficult to translate into operational decisions. We will look at how to use EVA to improve decision making.

Alternative names and related topics: value-based management; shareholder value analysis; discounted ...

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