Eva's Superiority over Traditional Financial Performance Measures: A Case Study of Banswara Syntex Limited

Abstract

EVA is a registered trademark developed by Stern Stewart&Company. Economic Value Added or EVA is an estimate of true economic profit after making corrective adjustments to accounting as per the provisions of GAAP (Generally Accepted Accounting Principles), including deducting the opportunity cost of equity capital. The EVA concept believes that for every performance measure there is a corresponding wealth measure. The traditional performance measures ignore the cost of capital. Thus, the results are overrated when these traditional techniques like ROI, ROE, NVA and MVA are applied to measure the performance of the company. EVA gives true results after considering cost of capital. In this research paper, attempt has been made to prove the superiority of EVA over traditional performance measurement techniques-ROI, ROE, NVA, EPS and MVA by taking Banswara Syntex Limited as a base company.