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EVA : A tool for measuring shareholders value creation – A case study of Maruti Udyog Limited

S. Vijayalakshmi*

Associate Professor, Department of Accounting and Finance, IBS, Hyderabad, AP, India.

Periodicity:December - February'2013
DOI : https://doi.org/10.26634/jmgt.7.3.2114

Abstract

The basic goal of a business unit is mainly value creation and shareholders wealth maximisation and attracting more investment. The success of every company as well as management is measured by the level of value creation of shareholders. Economic value added is basically a performance measurement tools which is related to the market value of the firm. EVA helps the businesses to calculate the actual profit once the capital and taxes are considered. A greater EVA is an indication of greater value. This tool helps to measure the ability of a business unit to create return based on certain risk. In this paper interrelationship between Return on capital employed (ROCE), NOPAT (Net Operating after Tax) and EVA as a percentage of capital employed is examined to find best measure of performance. The time period is taken from March 2003 to March 2012. Mathematical analysis is done and represented graphically. It was concluded that EVA is a better measurement tool of value creation for shareholders.

Keywords

EVA (Economic Value Added), NOPAT, ROCE (Return on capital employed).

How to Cite this Article?

S. Vijayalakshmi (2013). Eva : A Tool for Measuring Shareholders Value Creation – A Case Study of Maruti Udyog Limited. i-manager’s Journal on Management, 7(3), 34-40. https://doi.org/10.26634/jmgt.7.3.2114

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