DEVELOPING A PRACTICAL MODEL FOR CALCULATING THE ECONOMIC VALUE ADDED

The Economic Value Added (EVA) concept is a registered trademark (1990) of the US firm Stern Stewart & Co. and it is viewed as a measure of financial performance and also as potential main part of an integrated financial management system, leading to decentralized decision making and to maximize the shareholders' wealth. Our paper provides a synoptic survey of the use of EVA indicator and also gives the opinions of two main groups of EVA researchers: proponents of EVA and opponents to EVA. Furthermore, we develop a practical model for EVA calculation and try to make a parallel between Net Income as a measure of accounting profit and EVA as a measure of real economic profit. We also present a relevant example regarding the EVA calculation and give a special attention of the way of calculation of the three main components of EVA: net operating profit after taxes, weighted average cost of capital and economic asset (or invested capital). Also our articles emphasis some of the most important adjustments against accounting rules involved in the way of EVA calculation, in order to improve the correctitude of real economic profit calculation as a measure of value creation.