Jump to ContentJump to Main Navigation
Value–Based Management with Corporate Social Responsibility$
Users without a subscription are not able to see the full content.

John D. Martin, J. William Petty, and James S. Wallace

Print publication date: 2009

Print ISBN-13: 9780195340389

Published to Oxford Scholarship Online: September 2009

DOI: 10.1093/acprof:oso/9780195340389.001.0001

Show Summary Details
Page of

PRINTED FROM OXFORD SCHOLARSHIP ONLINE (www.oxfordscholarship.com). (c) Copyright Oxford University Press, 2020. All Rights Reserved. An individual user may print out a PDF of a single chapter of a monograph in OSO for personal use. date: 03 June 2020

Pick a Name, Any Name: Economic Profit, Residual Income, or Economic Value Added

Pick a Name, Any Name: Economic Profit, Residual Income, or Economic Value Added

Chapter:
(p.69) Chapter 5 Pick a Name, Any Name: Economic Profit, Residual Income, or Economic Value Added
Source:
Value–Based Management with Corporate Social Responsibility
Author(s):

John D. Martin

J. William Petty

James S. Wallace

Publisher:
Oxford University Press
DOI:10.1093/acprof:oso/9780195340389.003.0005

Economic value added (EVA) is based on the concept of residual income. For the financial accountant, there is no cost for equity capital. However, for the financial economist, a cost is associated with the use of equity capital—the opportunity cost of these funds. After considering this cost, we have the residual income. Still, EVA is more than residual income; it is also intended to eliminate the “distortions” created by the financial accountant that make no economic sense. The primary purpose of EVA is to provide an answer to the question, is management creating value for its shareholders? However, to think that EVA is simply about calculating a number—as informative as that might be—would miss an important point. In short, the intent is to use EVA as a behavioral tool to alter capital utilization and other incentives rather than as a tool of financial analysis.

Keywords:   economic value added, EVA, residual income, market value added, economic profit, cost of capital, NOPAT, CFROI

Oxford Scholarship Online requires a subscription or purchase to access the full text of books within the service. Public users can however freely search the site and view the abstracts and keywords for each book and chapter.

Please, subscribe or login to access full text content.

If you think you should have access to this title, please contact your librarian.

To troubleshoot, please check our FAQs , and if you can't find the answer there, please contact us .