Economic Value Added Assignment Example | Topics and Well Written Essays - 500 words

Economic Value Added - Assignment Example There are two main types of financing for a business, debt and equity financing. When accountants calculate net income, they deduct the interest expense (which is the cost of the debt capital). However, the cost of the equity is not taken into account. Therefore, the net income exaggerates the ‘true’ net income in economic terms. This flaw is overcome by the EVA method. A positive EVA indicates that value is being created i.e. value of the company increases by that amount. On the other hand, a negative EVA indicates that value is decreased and the company is now worth less than the initial capital employed (which is the assets from which earnings for the year are generated). (Russell) A value of zero means a sufficient achievement because shareholders have earned a return that just compensates for their risk. The term â€Å"Operating Capital† used in the EVA formula on the last page accounts for the interest-bearing debt, preferred and the common stock used to acquire the company’s net operating assets. In easy terms, it is the capital which was used to acquire net plant and equipment plus the net current assets. EVA = (Operating capital) * (ROIC – WACC) i.e. a firm adds value if it’s ROIC – Return on Invested Capital is greater than the WACC – Weighted average Cost of Capital. However, if WACC goes beyond the ROIC, then new investments in the operating capital will actually reduce the firm’s value. EVA is an estimate of a business’s true economic profit for the year, and if differs sharply for accounting profit. Accounting profit is basically determined without imposing any charge for the cost of equity capital and is therefore an overstatement in economic terms. However, EVA determines the residual income after accounting for all the cost of capital (debt and equity both) and provides a much better performance measure to the stakeholders. Misra, Anil and Kanwal Anil. "Economic Value Added (EVA) as the most

One of the stories's title Research Paper Example | Topics and Well Written Essays - 500 words

One of the stories's title - Research Paper Example In this case Jonathan is seen as being careful. This explains the post war atmosphere where threats could arise at any time. The anticipation of the many is obvious once Jonathan receives his token and chooses to hold it in his hand rather than directly pocket it. The narrator at this point carefully explains the active role of Jonathan in that he creates an optimistic atmosphere. The grant in this case is meant to ensure Jonathan regain his social status. The passage is a link between war period and the post war era. The civil war had taken a toll on lives of common citizens. The author uses Jonathan symbolically. Jonathan represents the common citizens and soldiers who took part in the civil war. The essence of this passage is that it indicates the jovial mood expressed by the characters. The pound note is symbolic as it represents peace and tranquility. The jovial state of Jonathan explains the mood expressed after civil war. The man defined as being in a state of â€Å"near-madness† (28) is a forecast of what will happen to Jonathan’s token. The man explains the exploitative nature of the government, Jonathan on the other hand represent group of individuals optimistic of the future but still depend on the government. In the end, the grant money is stolen by a gang of thieves. It is ironic that Jonathan is attacked immediately after receiving the cash. In the final part of the story a gang attacks his house and forces him to hand over the ‘egg-rasher’ (30). There is a connection between the passage and the events that transpired at the end of the passage. The thieves are satisfied with the 20 pounds they are given perhaps to indicate that they were aware of the exact amount handed to Jonathan. In this case the coal corporation represented could be the same gang leaders. The passage also connects with the title civil peace. The part represents a government which gives and takes from its own citizens. The