Understanding Economic Value Added

 (w/ F. Ferri and S. Treadwell) Harvard Business School Background Note 206-016.

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.