Hoque, Mahfuzul and Akter, Mahmuda and Shil, Nikhil Chandra (2004): Value-based measure: an application of EVA in small manufacturing company in Bangladesh. Published in: Journal of Institute of Bankers, Bangladesh , Vol. Vol. 5, No. December – 2004 (31. December 2004): pp. 135-155.
Download (203kB) | Preview
Performance measurement matters in today’s complex business arena irrespective of the type, nature, and volume diversity in business. If the result of performance measurement goes wrong due to the faulty or inaccurate selection of tool(s), then the total process will prove wrong in due time. This paper evaluates Economic Value Added (EVA) as a smart and powerful alternative to traditional performance measures like gross margin, percentage change in sales, net margin etc. in a small manufacturing company perspective. Small manufacturing companies are the focus of the study, as most of the people in such companies believe that EVA is truly designed for large companies and the equation of EVA cannot be applied in small companies due to the non-availability of required data. This paper results in a typical model applicable to small manufacturing companies where all adjustments and other technicalities are discussed with a real life example. Finally, the possible advantages and opportunities of using EVA as a performance measurement tool is discussed that may encourage the users/readers to incorporate EVA with their current setup to reap the potential benefits from it.
|Item Type:||MPRA Paper|
|Original Title:||Value-based measure: an application of EVA in small manufacturing company in Bangladesh|
|Keywords:||Economic Value Added (EVA), Market Value Added (MVA), Cost of Capital (COC), Net Operating Profit After Tax (NOPAT), Small Manufacturing Companies, Performance Measures, Tailored EVA, Generally Accepted Accounting Principles (GAAP)|
|Subjects:||F - International Economics > F3 - International Finance|
|Depositing User:||Nikhil Chandra Shil|
|Date Deposited:||12. Mar 2008 16:19|
|Last Modified:||12. Feb 2013 03:58|
1. Al-Amin and Hossain, D. M., 2004, “Economic Value Addition: From Stakeholders point of view”, The Bangladesh Accountant, October 03 – March 04, pp.106-108. 2. Bacidore, J.M. et.al., 1997, “The search for the best Financial Performance Measure”, Financial Analysts Journal, May-June, pp. 11-20. 3. Blair, A., 1997, “EVA Fever”, Management Today, January, pp. 42-45. 4. Blair, A., 1997, “Watching the new metrics”, Management Today, April, pp. 48-50. 5. Block, Stanley B. and Hirt, G. A., 2002, Foundations of Financial Management, McGraw-Hill Irwin. 6. Brealey, Richard A. and Mayers, Stewart C., 1991, Principles of Corporate Finance, McGraw-Hill Series in Finance, McGraw-Hill, Inc. New York. 7. Burkette, G.D. and Hedley, T. P., 1997, “The Truth about Economic Value Added”, CPA Journal, Vol. 67, No. 7, July, pp. 46-49. 8. Clinton, B.D. and Chen, S., 1998, “Do New Performance Measures Measure Up?”, Management Accounting, Vol. 80, No. 4, October, pp. 38-43. 9. Copeland, T., Koller, T. and Murrin, J., 1996, Valuation: Managing and Measuring the Value of Companies, New York, NY: John Wiley and Sons, Inc. 10. De Villiers, J., 1997, “The distortions of Economic Value Added”, Journal of Economics and Business, Vol. 49, No. 3, May/June, pp. 285-300. 11. Dierks, P. A. and Patel, A., 1997, “What is EVA, and How Can It Help Your Company?”, Management Accounting, Vol. 79, No. 5, November, pp. 52-58. 12. Fisher, A. B., 1995, “Creating Stockholder Wealth”, Fortune, Iss. 132, No. 12, December, pp. 105-116. 13. Kappi, J., 1996, “Corporate valuation: A note”, Unpublished working paper, Helsinki School of Economics and Business Administration, Helsinki. 14. Khan, M. Y. and Jain, P. K., 1999, Financial Management: Text and Problems, Tata McGraw-Hill Publishing Company Limited, New Delhi. 15. Klinkerman, S., 1997, “Case Study: EVA at Centura Bank”, Banking Strategies, Vol. 73, Iss. 1, January/February, pp. 58-59. 16. Kolb, B. A. and DeMong, R. F., 1988, Principles of Financial Management, Irwin. 17. Kroll, Karen M., 1997, “EVA and creating value”, Industry week, Vol. 49, April, pp. 102-109. 18. Lehn, K. and Makhija, A. K., 1996, “EVA and MVA: As Performance Measures and Signals for Strategic Change”, Strategy and Leadership, May/June, pp. 34-38. 19. Myers, Randy, 1996, “ Metric wars”, CFO, Vol. 12, October, pp. 41-50. 20. Reimann, B. C., 1988, “Managing for The Stockholder: An Overview of Value-Based Planning”, Planning Review, Vol. 16, No. 1, January/February, pp. 10-22. 21. Ross, S. A., Westerfield, R. W., and Jordan, B. D., 2003, Fundamentals of Corporate Finance, Tata McGraw-Hill Publishing Company Ltd. 22. Ross, S. A., Westerfield, R. W., and Jaffe, J., 1999, Corporate Finance, Irwin McGraw-Hill. 23. Roztochi, N. and Needy, K. L., 1998, “An Integrated Activity-Based Costing and Economic Value Added System as an Engineering Management Tool for Manufacturers”, Proceedings from the 1998 ASEM National Conference, pp. 77-84. 24. Roztochi, N. and Needy, K. L., 1999, “EVA for Small Manufacturing Companies”. Proceedings from the 1999SAM International Management Conference, The Society for Advancement of Management. 25. Schall, L. D. and Haley, C. W., 1980, Introduction to Financial Management, McGraw-Hill Book Company. 26. Singer, J. A. and Millar, D. L, 2003, “Value-Based Management Done Right: The EVA Implementation at Harsco”, EVAluation, Vol. 5, Iss. 1, April. 27. Stern, J. M., Stewart, G.B., and Chew, D.H., 1989, Corporate Restructuring and Executive Compensation, Cambridge, MA: Ballinger Publishing Company. 28. Stewart, G. B., 1991, The Quest for Value: A Guide for Senior Managers, Harper Business, New York. 29. Stewart, G. B., 1990, The Quest for Value: the EVA management guide, Harper Business, New York. 30. Stewart, G. B., 1994, “EVA: Fact and Fantasy”, Journal of Applied Corporate Finance, Vol. 7, No. 2, Summer, pp. 71-87. 31. Tully, S., 1993, “The Real Key to Creating Wealth”, Fortune, Iss. 128, September, pp. 30-50. 32. Tully, S., 1998, “America’s Greatest Wealth Creators”, Fortune, November, pp. 193-204. 33. Van Horne, J. C., 2002, Financial Management and Policy, Pearson Education Asia. 34. Wallace, J. S., 1997, “Adopting residual income-based compensation plans: Evidence of effects on management actions”, Working paper, University of California, Irvine, CA. 35. Wallace, J. S., 1997, “Adopting residual income-based compensation plans: Do you get what you pay for?”, The Journal of Accounting and Economics, Iss. 24, December, pp.275-300. 36. Welsh, J. A. and White, J. F., 1981, “A Small Business is not a Little Big Business”, Harvard Business Review, Vol. 59, No. 4, July/August, pp. 18-32.