Economic Value Added

Concept Briefing:

Economic value added or EVA is the value of an activity that is left over after subtracting from it the cost of executing that activity and the cost of having lost the opportunity of investing consumed resources in an alternative activity. In business terms, one could calculate EVA as Income from Operations minus potential income from investing the amount of capital employed including equity in sovereign debt, if sovereign debt can be considered an alternative opportunity to invest capital.

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Continue reading Comments (0) 25.06.2010. 20:37

Financial Leverage

Concept Briefing:

Financial Leverage or Gearing is the use of debt as a part of capital funds to invest in assets or projects with the hope to earn a greater rate of return than the interest rates. Leverage allows greater potential return to the investor than otherwise would have been available. The potential for loss is greater because if the investment becomes worthless, not only is that money lost, but the loan still needs to be repaid. Margin buying is a common way of utilizing the concept of leverage in investing. An unlevered firm can be seen as an all equity firm, whereas a levered firm is made up of ownership equity and debt. A firm's debt to equity ratio is therefore an indication of its leverage.

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Continue reading 24.01.2007. 08:22

Impairment of Assets

Concept Briefing:

Impairment of assets is an accounting standard (IAS 36) addressing mainly accounting for impairment of goodwill, intangible assets and property, plant and equipment. The standard includes requirements for identifying an impaired asset, measuring its recoverable amount, recognising or reversing any resulting impairment loss, and disclosing information on impairment losses or reversals of impairment losses.

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Continue reading 24.01.2007. 08:12