| Abstract: |
The paper is dealing with a performance measure Economic Value Added (EVA) and its application in the Czech Republic. The Economic Value Added is ranked between value-based measures. EVA measures whether the operating profit is enough compared to the total costs of capital employed. The paper consists of three parts. In the first part the general theory behind EVA and the connection between EVA and Market Value Added (EVA as a valuation tool) are discussed. Following main part focuses on the adjustments of accounting model that lead to the economic model. In detail are described adjusting the book value of equity capital and adjusting accounting profit to the net operating profit after taxes (NOPAT). The third part deals with the use of EVA as a management tool (identifying the drivers of value creation and designing compensation plans that induce managers to behave like owners). |
