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  • November 2005 (Revised July 2006)
  • Background Note
  • HBS Case Collection

Understanding Economic Value Added

By: Mihir A. Desai, Fabrizio Ferri and Steve Treadwell
  • Format:Print
  • | Pages:23
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Abstract

Explores the concept of economic value added (EVA) and its practical applications as a management control system for performance measurement and incentive compensation. Explains how EVA is measured and explores some of the adjustments to financial statements that are required to measure EVA. Provides a fully worked example of a firm's measurement of its EVA, both before and after adjustments to its financial statements. Describes several types of EVA bonus schemes and discusses both the benefits and limitations of EVA.

Keywords

Value

Citation

Desai, Mihir A., Fabrizio Ferri, and Steve Treadwell. "Understanding Economic Value Added." Harvard Business School Background Note 206-016, November 2005. (Revised July 2006.)
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About The Author

Mihir A. Desai

Finance
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