The EVA Challenge

Economic Value Added (EVA) is a measure of the true economic performance of a company, as well as a strategy for creating shareholder wealth. Stern and Shiely offer ways to properly implement EVA to better align the interests of managers with those of shareholders, and give companies a clearer picture of the value they create.

• Standard accounting measures don't give the true picture. They distort what is really happening and allow manipulation of the profit picture.
• EVA is the answer. Economic Value Added (EVA) is the profit that remains after deducting the cost of the capital invested to generate that profit. By adopting EVA, companies give everyone a clearer picture of the value being created by a company.
• EVA is more than a measurement system. EVA should be the foundation of a performance-based incentive plan.
• EVA works in the New Economy. New Economy businesses make heavy capital investments without immediate profitability. EVA gives such companies a way to measure the value they are creating.