Article : A Comparative Analysis Of Traditional Measures Of Financial Performance And Economic Value Added

Title

A Comparative Analysis Of Traditional Measures Of Financial Performance And Economic Value Added

Author

Dr. Asha Sharma

To create value for shareholder is demand of today’s scenario. It is focused in most of the Indian industries. For measuring shareholder value economic value-based models is adopted. It helps to align managerial decision-making with the firm preferences. Economic Value- Added is a technique to measure wealth created for share holders. EVA is the surplus generated by an entity after meeting an equitable charge towards providers of capital. It is the post-tax return on capital employed (adjusted for the tax-shield on debt) less than the capital employed. Companies which earn higher returns than cost of capital are creating shareholder’s value. This technique to measure performance of a company is far better than that of PAT, EPS and ROA. The present paper examines the value creation strategy of Infosys by analyzing whether the EVA better represents the market value of company in comparison to conventional performance measures. In this regards, EVA and the conventional measures of corporate performance such as PAT, EPS, ROCE and RONE are analyzed.

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