A Comparative Analysis of EVA & MVA Approach: With Special Reference to Automobile Industry

Abstract

The development of the capital market in India, both in strength and size along with the inflamed consciousness among the shareholders, have compelled the companies to consistently enhance the performance. There has been a swelling concern about the performance measures based on traditional accounting information such as Return on Equity (ROE), Earning per Share (EPS), Net Operating Profit after Taxes (NOPAT) and Return on Investment (ROI) etc. These measures, even though widely used, fall short to incarcerate the shareholders value creation/destruction as an outcome of management actions. EVA and MVA are the two different approaches to measure the existing financial status and predicting the future performance of the company. The present study is an attempt to determine the financial performance of chosen automobile companies in India and position them based on their mean EVA and MVA for the tenure of 5 years from 2006 to 2010.

Keywords: ROE, EPS, NOPAT, ROI, EVA and MVA

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