Economic Value Added (EVA): A Literature Review

Traditional accounting based performance measures fail to assess the true economic return of a firm. In this regard Economic Value Added (EVA) reflects true economic profit of a firm.  This paper explores the role, limitations, foundation, computation of economic value added (EVA) from the established literature. In addition, this paper addresses the key adjustments into residual earnings to reach into EVA. Finally a few numerical examples to introduce key adjustments have been provided. However, there are some other adjustments that are not addressed in this paper. Hence, considering all the financial adjustments in computing EVA can make the paper more worthy of knowledge sharing and dissemination. EVA is termed as a better performance measure across the firms.