Value-based measure: an application of EVA in small manufacturing company in Bangladesh

Mahfuzul Hoque, Mahmuda Akter and Nikhil Shil

MPRA Paper from University Library of Munich, Germany

Abstract: 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.

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) (search for similar items in EconPapers)
JEL-codes: F3 (search for similar items in EconPapers)
Date: 2004-12-31, Revised 2004-08-16
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Citations: View citations in EconPapers (1)

Published in Journal of Institute of Bankers, Bangladesh December – 2004.Vol. 5(2004): pp. 135-155

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