Taking a slightly closer look at the EVA basics prompts that the metric by design is a synthetic mixture of returns from the operating and financing activities, and therefore, yields a biased assessment of both the operating and overall performance. Fundamentally, the scale of the measurement...

We demonstrate analytically and illustrate with examples that the conventional measures of the residual operating income such as the Economic Value Added (EVA) are biased by design and so may yield a misleading assessment of financial performance. Fundamentally, the magnitude of the measurement...

This article introduces a new financial metric for managerial performance evaluation, Value Added to Invested Capital (VAIC), with the cost of unlevered equity as a hurdle rate to calculate the capital charge rather than the widely accepted WACC. VAIC preserves all positive features of the...

Taking a slightly closer look at the EVA basics prompts that the metric by design is a synthetic mixture of returns from the operating and financing activities, and therefore, yields a biased assessment of both the operating and overall performance. Fundamentally, the scale of the measurement...