PERFORMANCE ANALYSIS METHOD WITH EVA
EVA (Economic Value Added) is one way to assess financial performance. EVA is an indicator of the existence of a value adding investment. EVA indicates that the management company managed to increase corporate value for the owners of the company in accordance with the objectives of financial management to maximize firm value.
EVA term popularized by Stern Stewart Management Service, which consulting firms in the United States around the year 90's. Stern Stewart EVA calculates by subtracting the operating profit after tax for a total cost of capital. EVA can be formulated as follows:
EVA = EBIT – Taxes - Cost of Capital
EVA can be improved with:
1. Gain more profit without using more capital, how is cutting costs, working with production and marketing costs are
lower in order to obtain higher profit margins. This can also be achieved by increasing the velocity of assets, either
by increasing the volume of asset sales or working with a lower (lower asset).
2. Getting a refund (return) is higher than the cost of capital for new investment. This is actually related to the
company's growth.
EVA Indicators:
When EVA> 0, the process added value companies, the financial performance of both companies.
When EVA = 0, shows the company break-even position
When EVA <0, means the total cost of capital is greater than the operating profit after tax earned, so the company's financial performance is not good.
Shows the amount of total capital cost of the requested compensation or refund investors on capital invested in companies. The amount of compensation depends on the level of risk the company concerned, with the assumption that the investor is risk avoidance, the higher the risk the higher the returns that investors demanded.
Capital consists of own capital (equity) is derived from its shareholders, and debt from the creditors or bondholders of the company. Level has been determined brdasarkan capital cost weighted average (weighted average cost of capital) from its own capital cost (cost of equity) and cost of debt after taxes in accordance with the proportion of equity and debt in corporate capital structure.
EVA term popularized by Stern Stewart Management Service, which consulting firms in the United States around the year 90's. Stern Stewart EVA calculates by subtracting the operating profit after tax for a total cost of capital. EVA can be formulated as follows:
EVA can be improved with:
1. Gain more profit without using more capital, how is cutting costs, working with production and marketing costs are
lower in order to obtain higher profit margins. This can also be achieved by increasing the velocity of assets, either
by increasing the volume of asset sales or working with a lower (lower asset).
2. Getting a refund (return) is higher than the cost of capital for new investment. This is actually related to the
company's growth.
EVA Indicators:
When EVA> 0, the process added value companies, the financial performance of both companies.
When EVA = 0, shows the company break-even position
When EVA <0, means the total cost of capital is greater than the operating profit after tax earned, so the company's financial performance is not good.
Shows the amount of total capital cost of the requested compensation or refund investors on capital invested in companies. The amount of compensation depends on the level of risk the company concerned, with the assumption that the investor is risk avoidance, the higher the risk the higher the returns that investors demanded.
Capital consists of own capital (equity) is derived from its shareholders, and debt from the creditors or bondholders of the company. Level has been determined brdasarkan capital cost weighted average (weighted average cost of capital) from its own capital cost (cost of equity) and cost of debt after taxes in accordance with the proportion of equity and debt in corporate capital structure.
finance |
0 comments:
Post a Comment