A Comparison of EVA and NPV
Running head: A COMPARISON OF EVA AND NPV
A Comparison of EVA and NPV (discuss the differences and similarity of EVA and NPV; why would companies choose to adopt EVA, implementation issues; chronicle the implementation experience of EVA on a real life company).
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A COMPARISON OF EVA AND NPV
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A Comparison of EVA and NPV (discuss the differences and similarity of EVA and
NPV; why would companies choose to adopt EVA, implementation issues; chronicle the implementation experience of EVA on a real life company).
Finance executives are required not only to crunch numbers and generate forecast but to think ‘critically’, not just seeing the numbers but understanding their implications. This is what Melon (1994) refers to as conducting a ‘financial assessment’ which often involves; the comparisons of the firm’s profitability in relation to its competitor, a determination of the magnitude of its investment, estimating the likelihood of premiums, and projecting the impact stockholders may sustain.(Melone, 1994, p. 454)
While all sectors of an organization contribute to its success, it is the finance department that often drives major decisions. Do we invest, can we afford to invest, and if so, how much? This is a basic example of the type of questions asked frequently of a finance executive. Through analysis of the ‘numbers’ generated by the accounting department, or by conducting a financial assessment of the organization, finance executives are often able to guide the decision making process, and in ideal situations, generate revenues and growth for their company. This of course, is not to imply that the finance department has the final say, according to Melone (1994), “decision making at the organizational level involves integration, considering ‘all’ the issues raised by executives in various roles, considering ‘all’ the lines of reasoning that might be generated, and deciding how best to combine the collective knowledge and
A Comparison of EVA and NPV (discuss the differences and similarity of EVA and NPV; why would companies choose to adopt EVA, implementation issues; chronicle the implementation experience of EVA on a real life company).
1
A COMPARISON OF EVA AND NPV
2
A Comparison of EVA and NPV (discuss the differences and similarity of EVA and
NPV; why would companies choose to adopt EVA, implementation issues; chronicle the implementation experience of EVA on a real life company).
Finance executives are required not only to crunch numbers and generate forecast but to think ‘critically’, not just seeing the numbers but understanding their implications. This is what Melon (1994) refers to as conducting a ‘financial assessment’ which often involves; the comparisons of the firm’s profitability in relation to its competitor, a determination of the magnitude of its investment, estimating the likelihood of premiums, and projecting the impact stockholders may sustain.(Melone, 1994, p. 454)
While all sectors of an organization contribute to its success, it is the finance department that often drives major decisions. Do we invest, can we afford to invest, and if so, how much? This is a basic example of the type of questions asked frequently of a finance executive. Through analysis of the ‘numbers’ generated by the accounting department, or by conducting a financial assessment of the organization, finance executives are often able to guide the decision making process, and in ideal situations, generate revenues and growth for their company. This of course, is not to imply that the finance department has the final say, according to Melone (1994), “decision making at the organizational level involves integration, considering ‘all’ the issues raised by executives in various roles, considering ‘all’ the lines of reasoning that might be generated, and deciding how best to combine the collective knowledge and