 Quote of the Day “No one can resist an idea whose time has come.„
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EVA MomentumEVA Momentum is the change in a business's EVA divided by the prior period's sales. It is introduced as a more reliable business performance metric compared to EVA. The consultants Bennett Stewart and Joel Stern who developed the ratio claim that it is the one ratio that can't be manipulated. It's the only percent metric where more is always better than less. It always increases when managers do things that make economic sense. In order to to get EVA momentum right, business managers needs to refrain from being obsessive about sales. If increase in sales doesn't boost EVA, it does nothing to create value. Managers should consider bailing out of EVA-negative businesses and annihilating wasted capital.Need more information on EVA Momentum?30.05.2011. 04:08 Economic Value AddedConcept 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.The formula for calculating EVA is as follows: EVA = Net Operating Profit After Taxes (NOPAT) - (Capital x Cost of Capital) Shareholders of the company will receive a positive economic value added when the return from the equity employed in the business operations is greater than the cost of that capital. Any value obtained by employees of the company or by product users is not included in the calculations. See also EVA Momentum. Need more information on Economic Value Added?30.05.2011. 04:03 Total Cost of OwnershipTotal Cost of Ownership or TCO is an estimate of a total financial and/or non-financial outlay associated with acquiring, operatng and maintaining an asset.The main purpose of TCO is to compare different options in procuring an asset that extend beyond comparing just the initial investment costs.Operating expenses may include floor space, electricity, fuel, testing, training etc. Maintainance or long-term expenses include replacement, future upgrade or scalability expenses and decommissioning.Need more information on Total Cost of Ownership?30.05.2011. 03:55
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