In the field of corporate finance, Economic Value Added (EVA) is one of the most sought after financial models of recent times to measure the financial performance of a company or its different activities. Formulated by Joel M. Stern, the current model computes cost of an activity by subtracting the cost of execution and the opportunity cost associated with it. This model is closely linked to the concept of economic profit. Today, many of the world’s leading organizations follow the EVA model for computing their profitability. The EVA model is also used to decide employee compensation packages.
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Source :- IIPM Editorial, 2006
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Monday, June 12, 2006
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