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EVA and its Significance to Chinese Listed Companies

Liyan Liu

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Abstract

EVA is abbreviated from Economic Value Added,which is found by deducting the cost of equity capital from accounting profit.EVA tells the wealth a company created or lost during a period.As compared with profit, EVA is hard to manipulate and easy to understand; the system of bonus bank is effective to stimulate the management;and harmonize the various aim of a company.The concept is extremely attractive to the listed companies in our country.To evaluate the companies by EVA,the companies need adjust their activities of financing,investing and dividend policy,and restrain the“inside control.”The paper suggests to study the use of EVA in our country and make it a reference of evaluating for government policy-making.

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What this paper is about

EVA is abbreviated from Economic Value Added,which is found by deducting the cost of equity capital from accounting profit.EVA tells the wealth a company created or lost during a period.As compared with profit, EVA is hard to manipulate and easy to understand; the system of bonus bank is effective to stimulate the management;and harmonize the various aim of a company.The concept is extremely attractive to the listed companies in our country.To evaluate the companies by EVA,the companies need adjust their activities of financing,investing and dividend policy,and restrain the“inside control.”The paper suggests to study the use of EVA in our country and make it a reference of evaluating for government policy-making.

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Available abstract

EVA is abbreviated from Economic Value Added,which is found by deducting the cost of equity capital from accounting profit.EVA tells the wealth a company created or lost during a period.As compared with profit, EVA is hard to manipulate and easy to understand; the system of bonus bank is effective to stimulate the management;and harmonize the various aim of a company.The concept is extremely attractive to the listed companies in our country.To evaluate the companies by EVA,the companies need adjust their activities of financing,investing and dividend policy,and restrain the“inside control.”The paper suggests to study the use of EVA in our country and make it a reference of evaluating for government policy-making.

Key concepts: Economic Value Added, Business, Dividend policy, Dividend, Profit (economics), Finance, Equity financing, Equity (law)

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