Eva and Mva

In: Business and Management

Submitted By 8528
Words 367
Pages 2
Economy Value Added (EVA) and Market Value Added(MVA)
In the business world, basically the financial ratio is the most common indicator to measure the performance of a company. But there are also others performance indicator for investors to choose. For example the Economy Value Added (EVA). Besides that, there are also one performance indicator which called Market Value Added (MVA)
MVA is one of the indicator for a company's performance. According to Stewart, Market Value added measure the corporate performance cumulatively. Besides that, Market Value added also represents the share market’s assessment for a time period of the net present value of a company’s past and forecasted projects. (Stewart, 1991) The formula for MVA is
MVA=Market Value of Company-Invested Capital

EVA is use to measure the economic profit and EVA is also the internal measurement of a company performance. EVA is a element that drives the MVA. The formula for EVA is
EVA=(ROIC-WACC)×Invested Capital
If compare the EVA and MVA, the EVA is more suitable to making comparison between company and evaluate the performance of company. It is because market value is the performance of the company in long term but EVA is focus on short term performance. MVA is the combination of market value of company and invested capital which will not have the dynamic changes over the short period time. But the EVA is based on Return on Invested Capital and WACC which will have a lot of changes over the short period. Besides that, from above, we know that MVA is the performance of a company which counted cumulatively, so the performance is the company whole life performance. But the EVA is not. So, the EVA will have more changes if compare with MVA and shows the performance of the company better.
Although both MVA and EVA show the performance of company, but the MVA is rely on the share price and…...

Similar Documents

Mvas - Bridging Digital Divide

...Mobile Value Added Services (MVAS) A vehicle to usher in inclusive growth and bridge the digital divide January 2011 www.deloitte.com/in 2 Contents Message from Chairman, TRAI Message from President, ASSOCHAM Message from Secretary General, ASSOCHAM Message from Deloitte Objective & Methodology Executive Summary Introduction What is MVAS? What is Utility MVAS? Key categories in Utility MVAS A Framework for Utility MVAS Drivers for Utility MVAS Categories in focus Category 1 : M-Commerce Category 2 : M-Education Category 3 : M-Health Category 4 : M-Governance Current state of Utility MVAS in India Utility MVAS: Challenges Utility MVAS: Potential solutions Utility MVAS: Suggested implementation approach Acknowledgements Notes Authors 4 5 6 7 8 9 12 15 18 18 20 21 26 27 33 40 46 51 54 56 62 64 65 68 Mobile Value Added Services (MVAS) - A vehicle to usher in inclusive growth and bridge the digital divide 3 Message from Chairman, TRAI I would like to compliment the ASSOCHAM for bringing out a Study Report on Mobile Value Added Services – A Vehicle to Usher in Inclusive Growth and Bridge the Digital Divide in India. Mobile Value Added Services (MVAS) have assumed significant importance in recent times due to the rapid growth in wireless subscriber base. They have enhanced the utility of mobile phone as a powerful medium to deliver information viz., News, Entertainment, Advertisement, Music, Games, Commerce, Education and Health. Simultaneously, they......

Words: 26511 - Pages: 107

Npv vs Eva

...NPV vs EVA http://brainmass.com/business/accounting-business-analysis-financial-reporting/9537 | Investment: | $30,000 | | | | | | | | | | | | | Three years life | | | | | | | | | | | | | | $14,690 annual cash flows | | | | | | | | | | | | | hurdle rate | | 20% | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | NPV Year | Cash | Dep'tion | BV of asset | Net Inc | | ROA% | PVF | PV | | | | | | | | | | | | | | | | | | | | | | 0 | -30000 | | 30000 | | | | 1 | -30000 | | | | | | | 1 | 14690 | 10000 | 20000 | 4690 | | 15.63% | 0.833333 | 12242 | | | | | | | 2 | 14690 | 10000 | 10000 | 4690 | | 23.45% | 0.694444 | 10201 | | | | | | | 3 | 14690 | 10000 | 0 | 4690 | | 46.90% | 0.578704 | 8501 | | | | | | | | | | | | | | |   | | | | | | | | NPV | | | | | | | 944 | | | | | | | | IRR | | | | | 22.00% | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | EVA #1 | NPV Year | | Dep'n | Cash | BV of asset | Net Inc | Cap Change | EVA | PVF | PV of EVA | Dep*PVF | Cap charge *PVF | Total | | | 0 | | | | $30,000 | | | | | |   |   |   | | | 1 | | 10000 | 14690 | $20,000 | 4690 | $6,000 | ($1,310) | 0.833333 | ($1,092) | 8333 | $5,000 | $13,333 | | | 2 | | 10000 | 14690 |......

Words: 534 - Pages: 3

The Case Study of Eva Airways Core Competencies in Airline Industry

...The Case Study of Eva Airways Core Competencies in Airline Industry | December 252012 | The idea of "core competences" is one of the most important business ideas currently shaping our world. This is one of the key ideas that lies behind the current wave of outsourcing, as businesses concentrate their efforts on things they do well and outsource as much as they can of everything else. Eva Airways core competencies covers excellent flight safety record, advanced flight equipment to enhance flight safety, fleet complete, network-intensive services, caring and meticulous service that includes their current and future customer service programs, human capital investment for providing excellent customer service, and professional management. With these excellent customer-oriented services, Eva Air proves that they are already world-class air carrier and robustly have an edge to compete in international market with the low-cost airline carrier, prestige airline carrier, and even the government-controlled carrier. We also believed that Eva Air’s customer-oriented services (core competencies) could sustain the growing or future demands in airline industry and can survive the toughness of the competition. The Case Study of Eva Airways Core Competencies in Airline Industry I. INTRODUCTION The airline industry exists in an intensely competitive market. Over the years, air travel has become so commonplace that it would be hard to imagine life without it. The airline industry,......

Words: 6430 - Pages: 26

Vbm and Eva

...added (EVA) is one of the approaches to measure the value-creating performance of business units and managers. 1) Do you think that EVA can be 'used' by company managers to actually improve performance? YES Accounting measures more often produces historical data or distorted data that may have no relation with the real status of the company. But, EVA goes for adjustments to accounting data to make it economically viable. EVA is able to improve the performance of business unit or managers. For example, R&D normally classified as expense under accounting standard unless it meet several extremely requirements, then expense can be capitalized. Under EVA approach, R&D expense added back to the NOPAT which encourage managers innovation mind since the cost of innovation will not considered as a distortion of performance measurement as long as R&D will bring in the economic benefit in the future. The real life example would be James Hardie, he introduced EVA to its operation in 1996 and made a great success by doing that. We have to notice that, EVA performance measurement is a financing measurement, it must link to employees’ compensation and inventive payment system NO EVA is a single period measurement approach which discourages managers to undertake long term profitable project. Compare to ROI, ROI maximizing rate of return but not necessarily maximize the return for shareholders. 2) Companies should be required to calculate and report EVA or......

Words: 336 - Pages: 2

The Concept of Ecocnomic Value Added (Eva).

...performance of a company in relation to the remaining wealth calculated by taking away the cost of capital from the economic profit also known as the operating profit. EVA seeks to show a company’s excess profit over the amount of earnings that the company needs to maintain its capital and whether there is any wealth created. The economic profit is usually adjusted for taxes on the basis of cash. EVA can be deduced as follows: EVA= Net Operating Profit after Taxes (NOPAT) – [Capital * Cost of Capital] The cost of capital refers to the yearly return needed by the shareholders as well as the lenders of the business entity in exchange for providing capital. Each of the returns of the contributors is calculated differently. Lenders’ returns are shown in the loan agreement whereas that of the shareholders is shown in the company’s dividend policy. Both returns to the lenders and that of the shareholders are used in the computation of weighted average cost of capital. This is in turn used to derive the amount supposed to be deducted from the NOPAT when calculating EVA. NOPAT plays a vital role in calculating economic profit because this equation makes an attempt to look at the actual finances that are available to the company from its operations as opposed to the accounting profit only. After establishing the funds available, EVA then deducts a charge that relates to the cost of capital maintenance. This has its basis on the concept of capital having a cost meaning that that cost......

Words: 691 - Pages: 3

Discuss Who Is to Blame for Eva Smith's Death in 'an Inspector Calls'

...different characters in ‘An Inspector Calls’ and their contributions to the death of Eva Smith before concluding who I feel is to blame the most. Arthur Birling is first to be questioned by the Inspector, at first he does not recognise the girl’s name but after seeing her picture he realises that she was a young girl that once worked as a labourer in his company. He claims that he fired this girl for asking for higher wages. He displays a lack of empathy and understanding for the life of the lower class by adding to the end of his anecdote: ‘I refused- of course.’ This quote shows how he clearly thinks the notion of asking for a raise in pay is so preposterous that it is not worth talking about and this is confirmed by his shock when the inspector enquires why he refused this pay rise. There is an obvious ignorance about Arthur Birling, he seems to think he has great knowledge, as shown in the way he talks with his family in his speech at the beginning, which is laced with self-importance. Yet he displays very little insight in to how difficult it was for a girl living on such little income. He expresses how he does not need the help of the girl and he says ‘they could go work somewhere else, it’s a free country’ but his son, Eric shows a more realistic view that it isn’t a free country ‘if you can’t go and work somewhere else’ which Birling immediately dismisses. Birling’s decision to fire Eva Smith showcases how he was very quick not to consider how her life may be......

Words: 1269 - Pages: 6

Asahi Glass Eva

...management system for resource allocation and performance measurement is based on economic value added (EVA). 2) Problems & Causes (in 2002) a. The effect of Main bank (Tokyo-Mitsubishi bank) Main bank is a cross shareholder, so they can interfere on company’s operation, performance and financial. For example, some corporations invited senior bank managers as executive or non-executive board members which would be a part of corporate governance. Since main bank is the largest debtor, they will concern on company’s risk and possibly to manage company to avoid financial risk to make sure they could get money back result in confused of company’s goal. b. The obstacle of reform Conflict with minority shareholders and stake holders AGC is global company with many joint ventures in many regions. In order to reform, a lot of function, company’s structure and corporate culture have to be drastically changed. For example, reduced of board of directors and management role, incentives, unfair resource allocation and performance measurement would result in conflict of interests and resist from local management level. 3) Choices Mr. Ishizu decided to implement EVA as a tool for resource allocation as well as for performance evaluation for managers and above. 4) Evaluation Refer to the case, EVA is calculated by the following formula: EVA = NOPAT – CE x WACC, and EVA Rate = NOPAT/ (CE x WACC) c. Merit * Help maximizing profit: all managers......

Words: 566 - Pages: 3

Eva for Entrepreneur

...The goal of all companies is to create value for the shareholder. But how is value measured? Wouldn't it be nice if there were a simple formula to figure out whether a company is creating wealth? A growing number of analysts and consultants think there is an answer. Like many economic formulas, the measure - economic value added (EVA) - is both intriguingly clever and maddeningly deceptive. Does EVA simplify the task of finding value-generating companies or does it just muddy the waters? What Is EVA? EVA is a performance metric that calculates the creation of shareholder value, but it distinguishes itself from traditional financial performance metrics such as net profit and earnings per share (EPS). EVA is the calculation of what profits remain after the costs of a company's capital - both debt and equity - are deducted from operating profit. The idea is simple but rigorous: true profit should account for the cost of capital. To understand the difference between EVA and its older cousin, net income, let's use an example based on a hypothetical company, Ray's House of Crockery. Ray's earned $100,000 on a capital base of $1 million thanks to big sales of stew pots. Traditional accounting metrics suggest that Ray is doing a good job. His company offers a return on capital of 10%. However, Ray's has only been operating for a year, and the market for stew pots still carries significant uncertainty and risk. Debt obligations plus the required return that investors demand......

Words: 851 - Pages: 4

Using Eva to Align Management Incentives with Shareholders’ Interests

...Using EVA to Align Management Incentives with Shareholders’ Interests Incentive Compensation: The Need and the Challenge The objective of most incentive compensation programs is to address the ‘agency’ problems that besiege public companies. Specifically, public firms that hire professional management experience a natural separation between those that own the firm (the “principals”, i.e., shareholders) and those that manage the firm (the “agent”). Once can conclude that, for the vast majority of public firms, the owners’ ultimate goal is to maximize their own wealth invested in that firm. In most cases, the board that shareholders have elected to represent the owners’ interests hires professional managers to accomplish this goal for them. However, as Jensen and Meckling observed in a paper they co-authored in the mid-1970’s, without the proper incentives, most managers will not gravitate towards decisions that maximize firm wealth. Instead, the authors claim that managers with limited investment in the firm they have been hired to manage are inherently selfish. They will divert firm resources away from investments that create the most firm value towards those that bring the most value to the individual, such as perks, notoriety and empire-building. Jensen and Meckling proposed that the solution to this problem is to make the managers into owners by giving them equity and ultimately suggested that “the best way out of America’s corporatestructural rut was......

Words: 594 - Pages: 3

Mvas Services

...AS A PART OF SUMMER INTERNSHIP AT: NETXCELL LIMITED SUBMITTED IN THE PARTIAL FULFILLMENT OF THE REQUIREMENT FOR THE AWARD OF DEGREE OF POST GRADUATE DIPLOMA IN MANAGEMENT AT INSTITUTE OF MANAGEMENT TECHNOLOGY, HYDERABAD INTRODUCTION MVAS – Mobile value added services are those services that are not part of the basic voice Offer and are availed separately by the end user. They are used as a tool for differentiation and allow mobile operators to develop another stream of revenue. Mobile remains a vibrant and evolving industry constantly finding new ways to inter-connect the user’s world in spheres such as automotive, utilities, health and education, and new ways to manage financial transactions. Mobile data continues to drive rapid traffic growth for mobile operators with all regions showing impressive data volume growth rates as more and more people connect to the internet via mobile. In emerging markets, growth will be driven by the increased penetration of smartphones, while in developed markets it will be driven by both greater smartphone adoption and increased download speeds made possible by new technology such as 4G. Ecosystem for VAS Services Figure 1: MVAS Ecosystem Content Providers: Content providers are the entities that own the original content. They are typically media companies and movie studios who own rights for the movies and music. In the US, NFL and NBA provide content for mobile......

Words: 1512 - Pages: 7

Eva Economic Value Added

...Jason Coojacinto, Sid Guanio, Kelvin Ong IEFINMT ER1 1. What is EVA? What are the advantages and disadvantages of using EVA as a measure company performance? Economic Value Added (EVA) is basically an estimate of a company’s economic profit. It is known to focus on managerial effectiveness in a year which represents the residual income that is in excess after taking out the cost of all capital not considering the charge for equity capital. An advantage of using EVA to appraise performance is that it takes into account all costs inclusive of the cost of equity capital. The disadvantage faced when using this is the workability of the calculations this require. It is difficult to find the correct cost of equity, EVA is known to be irrelevant for some companies, and lastly is that the EVA value of a big company, which is less efficient than a small company, would still turn out to be greater than that of the small company. 2. Please examine the historical performance of Coca-Cola and PepsiCo in terms of EVA. What trends do you observe? What are the factors behind those trends? What do you think are the key drivers of EVA? Comparing the historical performance of Coca-Cola and PepsiCo with EVA, it seems that the EVA of Coca-Cola is more stable compared to PepsiCo. However, PepsiCo rises faster than Coca-Cola because it’s EVA surpassed Coca-Cola in year 2000 even if it’s EVA from 1994-1997 was negative. Factors behind those trends | Coca-Cola | PepsiCo. ...

Words: 454 - Pages: 2

Mva, Eva, Fcf

...1.0 BACKGROUND In assignment 2, I was assigned to find the relationship between Free Cash Flow (from now on refer as FCF), Economic Value Added (from now on refer as EVA) and Market Value Added (from now on refer as MVA), specifically whether a company with high FCF also have high EVA and MVA. Explanation using empirical evidence is also needed to support my reasoning and arguments. Therefore, in order to complete this assignment, I have used a few types of references which are financial management reference books, journals, articles from Fortune magazine and set-up an interview with Mr. Amiruddin b. Abdul Shukor which is the Chief Financial Officer (CFO) for Nationwide Express Courier Services Berhad. Throughout his career, he had worked in Permodalan Nasional Berhad (PNB), Permodalan Terengganu Berhad (PTB), Securities Comission Malaysia (SC) and Malaysian Industrial Development Finance Berhad (MIDF). An interview session was set with him on 2/12/2011 at his office in the headquarters of Nationwide Express Courier Services Berhad in Shah Alam, Selangor. 2.0 FINDINGS 2.1 Free Cash Flow In definition, FCF is the cash flow actually available for distribution for investors after the company has made all the investment in fixed assets and working capital necessary to sustain ongoing operations (Brigham & Ehrhardt, 2005). Basically, the formula for FCF is as follows: In the investors’ perspective, positive value of FCF is more favorable than negative value because...

Words: 2347 - Pages: 10

Why Eva Is Better Than Roi

...Why EVA is better than ROI (ROCE, ROIC, RONA, ROA) and earnings, operating profit etc. Equity investors should earn on their capital a return far over risk-free interest rate in order to induce and maintain capital in the company Therefore earnings should always be judged against the capital used to produce these earnings Earnings can be easily increased simultaneously worsening the position of shareholders e.g. if more capital is poured into a company although the return on capital is 5% or less (even lower than long-term government bond) Thus it is clear for most people that any earnings figure can not alone be a reliable performance measure (still some companies use EPS !?) ! Following slides focus on explaining why also return on capital alone is often an unreliable performance measure 1 © Esa Mäkeläinen 12.3.1998 E-mail: Esa.Makelainen@iki.fi EVA is a registered trademark of Stern Stewart & Co. EVA vs. rate of return There are two very good reasons why EVA is much better than ROI (RONA, ROCE, ROIC) as a controlling tool and as a performance measure 1. Steering failure in ROI Increase in ROI is not necessarily good for shareholders i.e. maximizing ROI can not be set as a target. (Increase in ROI would be unambiguously good only in the companies where capital can be neither increased nor decreased -> however we leave in a world where both operations are easily executed in almost all companies) 2. EVA is more practical and understandable than ROI As an......

Words: 1267 - Pages: 6

A Discussion About Organization Chart Features in Eva Air Corporation

...ORGANIZATIONAL BEHAVIOR EXTRA CREDIT ASSIGNMENT ZHONGYI ZHANG ID:31062818 25 JAN 2011 A discussion about organization chart features in EVA AIR Corporation Here is the Organization Chart about the EVA AIR Corporation. I have worked in the Cargo Operation Department in EVA AIR Corporation for about one year. As we all know, each air corporation has strict articles and rules. They are made for the safety for each flight procedure. The whole company cannot make any mistakes. If it made, there may cause the death of hundreds of lives and the waste of billions of dollars. So one of my supervisor even told me that the working in the air corporation is not only for economic interests but also for conscience. Let me get down to discuss the features of some key elements in the EVA AIR that the managers use to design their organization chart. The Departmentalization is the first element I want to explain. The EVA AIR is an multinational air corporation in the world. It has three types to departmentalize their division and dept. One is the most popular way by functions performed. In most people's view, air corporation make profits by the passenger services. Before I joined the EVA AIR group, I also believed that it was true. However, after I worked in EVA AIR Cargo, I found that air corporation makes its profits mostly from their cargo services. In order to make the maximum profit of each flight, i.e.,let the plane to carry the maximum weight...

Words: 1256 - Pages: 6

Lifespan Development and Personality of Eva Peron

...Life Span Development and Personality of Eva Peron Rhonda Hager PSY/300 June 18, 2012 Teresa Neal Life Span Development and Personality of Eva Peron Introduction Many factors influence the way a person will develop and the personality they will have. Scientists have long debated on the subject of heredity versus environment and how each effects the way a person develops. Different theories have also been discovered to explain a person’s personality. In this paper we will look at how heredity and environment played a role in the development of Eva Peron. We will also discuss how the different theories of personality explain the woman she became. Influences of Heredity and Environment Eva Peron was born on May 7, 1919 in Los Toldos, Argentina. Her mother, Juana Ibarguren, was the mistress of Juan Duarte, a local land owner. Juana had a large personality. She was the type of person who got what she wanted. She worked in the kitchen of the Duarte house and set her eyes on Juan Duarte. Not long after she became pregnant with her first child. It was not uncommon for men of means in Argentina to have mistresses; instead it was assumed that they would. Juan Duarte provided for Juana and her children to the extent that he could, while keeping them away from his wife and family. Eva was born into poverty and the entire family, mother and five children, shared a one room home (Barnes, 1935). Since she was not from the poorest class of people, her neighbors......

Words: 1216 - Pages: 5

Neeli Chatri Wale | IMDb: 7 HD Bleach | Chaussettes