Some major companies live and die by EVA. For example, General Electric where more capital is only allotted to divisions that pass the EVA threshold,…

Some major companies live and die by EVA. For example, General Electric where more capital is only allotted to divisions that pass the EVA threshold, and divisions that regularly flunk are sold off. It’s a simple, but powerful, approach that looks at a company’s numbers from an economist’s point of view and factors in not just explicit costs but also implicit costs in measuring a firm’s profitability. Tell us what you think. Take a look at:http://www.investopedia.com/terms/e/eva.asphttp://www.valuebasedmanagement.net/methods_eva.htmlhttp://www.investopedia.com/video/play/eva/

Economic Value added or EVA calculates the estimated economic profits for anorganization using a formula which is net operating profits after taxes minus value of capital ofthe firm. In other…