The False Claims about Economic Value Added

Abstract:     
Farm profitability and the measurement of such profitability are usually calculated by traditional profitability measures such as return on equity (ROE), return on assets (ROA), net farm income (NFI) and the operating profit margin (OPM). The emergence of economic value added (EVA) during the 1990’s has changed the field of performance measurement. The question arises whether the new value measurement can give a better answer about value creation than traditional measures in specific areas such as farm profitability. EVA is not a new concept. It has been around for years. There are many claims about EVA, that some of them are false. This article provides EVA definitions, Importance of EVA, The advantages of EVA, Limitations of EVA, What can be done to increase EVA?, Comparing traditional measures and EVA, and False claims about EVA.

Number of Pages in PDF File: 13

Keywords: EconomicValue Added(EVA),Return On Equity (ROE), Return On Assets (ROA), Net Farm Income (NFI) and the Operating Profit Margin (OPM)

working papers series