EVA as a Performance Assessment Tools for Listed Companies in China

EVA (Economic Value Added) is the balance found by deducting the cost of capital from the net operating profit after tax (NOPAT). Compared with the accounting profit, EVA takes into account all cost of equity including that of the debt and thus reflects the real wealth a company creates in a particular period. It is easy to understand and hard to be manipulated. The system of EVA bonus bank is effective in stimulating the management and harmonizing various aims of a company. EVA as a performance assessment tool will help regulate the listed companies in China in their activities of finance, investment, and dividend, and refrain their inside control.