Vol.
7 No. 3
Year: 2013
Issue: Dec-Feb
Title: EVA: A tool for measuring shareholders value creation – A
case study of Maruti Udyog Limited
Author Name: S. Vijayalakshmi
Synopsis:
The basic goal of a business unit is mainly value
creation and shareholders wealth maximisation and attracting more
investment. The success of every company as well as management is
measured by the level of value creation of shareholders. Economic value added
is basically a performance measurement tools which is related to the market
value of the firm. EVA helps the businesses to calculate the actual profit once
the capital and taxes are considered. A greater EVA is an indication of greater
value. This tool helps to measure the ability of a business unit to
create return based on certain risk. In this paper interrelationship between
Return on capital employed (ROCE), NOPAT (Net Operating after Tax) and EVA as a
percentage of capital employed is examined to find best measure of
performance. The time period is taken from March 2003 to March 2012.
Mathematical analysis is done and represented graphically. It was concluded
that EVA is a better measurement tool of value creation for shareholders.
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