The purpose of the paper is to present a cornucopia of approaches and ways of defining, measuring and using the concept of Economic Value Added (EVA). EVA is a financial performance measure that emphasizes the maximization of shareholder value, as opposed to mere maximization of net profit. The authors familiarize the readers with important ideas and research that have contributed to the development of the concept of EVA. The nature of this paper is exclusive to the review of secondary sources, such as theoretical insights as well as the results of numerous empirical research of EVA. Furthermore, the paper will show various adjustments to financial statements before accounting profits can be used to calculate EVA. The results of the aforementioned research will unequivocally present EVA as one of the most widely used and accepted measures of overall firm performance, gaining more popularity when coupled with the notions of strategic (financial) management. The paper concludes by determining the role and place of the concept of EVA in the process of value and performance management, as well as strategic management.
performance measures strategic management cost of capital