Use of EVA indicator in a concrete enterprise

Abstract

Purpose of the article: This article is an illustrative case study describing usage of EVA indicator in chosen specific company. Key part of the article deals with application of EVA indicator in company. It consists of procedure how to adjust accounting data into required form and determine weight costs of capital. Then there is calculation of EVA indicator and other indicators based on it. Last part is comparison of results. Methodology/methods: The basic method is case study. Its aim is to demonstrate good understanding or causation explanation of particular example. It takes into account the overall context of the problem. Scientific aim: The objective of the article is to come near to theoretical economic procedures and highlight the problematic areas within the practical application of EVA indicator in the business. Next aim is to emphasize the importance of EVA indicator. Findings: This article illustrates some problematic issues that companies may face while calculating EVA indicator. Czech accounting standards do not correspond with international accounting standard methodology known as IFRS for compiling statements. First difficult area was conversion of assets into net operating assets NOA. Then operating profit is modified in respect of so-called unusual costs and revenues. The next issue in calculation of EVA indicator is stating average weight costs on capital. The last area of problems is the time flow of leasing contracts, value of liabilities arising from them and assessing the lifetime of leased property. Conclusions: The article empirically examined the effectiveness of EVA indicator with regard to its relation to the accounting performance indicators. It was proved that although the company reported financial health within the frame of financial analysis, it gave owners only slightly increasing economic value added. The article points out the need of usege of EVA indicator in corporate practice.