Economic Value Added as a Dependence on the Corporate- and Market-life Cycle
Journal Title: Journal of Competitiveness - Year 2011, Vol 3, Issue 2
Abstract
Economic value added (EVA) is an indicator which is widely used as the main tool for financial analysis. There are two methods of calculating it. The original method which was made by Stern & Stewart is defined as the net operating profit after taxes minus the cost of capital. The second method which was developed and used by the “Czech Ministry of Industry and Trade” indicates that, the economic value added is the difference between return on equity and the alternate cost of equity that is composed of separate risk rewards, and this “spread” is consequently multiplied by the equity. Economic value added depends on many factors. Whereas some of them are controllable by the company, others are not. This article is focused on the relationship between economic value added and the corporate- vs. market life cycle. This is because, there is an assumption that conditions for developing EVA changes depending on the actual phase of corporate- and market life cycle. In this research, the model by Reiners (2004) is used to identify the phases of corporate- and market life cycle and the method provided by the “Czech Ministry of Industry and Trade” is used to calculate EVA. However, there is a consideration of the relativity of EVA in the form of “spread” because of the intercompany comparison. The study found that, the highest spread is achieved by companies that are in the phase of expansion and phase of market expansion. On the contrary, companies in the phase of declension during market declension achieved the lowest and negative spread.
Authors and Affiliations
Zdeněk Konečný
Keywords
Related Articles
- EP ID EP119402
- DOI -
- Views 134
- Downloads 0
Positive Word of Mouth Marketing: Explaining the Roles of Value Congruity and Brand Love
Many companies have found that for their products to be successful in the market, they must first pay for word of mouth marketing and then utilize other types of ads. Previous studies have not paid enough attention to th...
THE KEY FACTORS INFLUENCING CLIENTS’ DECISION-MAKING IN THE MARKET OF SELECTED PLANNED HEALTHCARE IN THE CZECH REPUBLIC
Considering the system, the economics and competitive attitudes in the healthcare market, we can certainly apply standard market tools that are usable in any competitive environment, however, with some limitations. The l...
The Impact of The Structural Funds on Competitiveness of Small and Medium-Sized Enterprises
The article deals with the analysis of the use of EU Structural Funds as the main tool of cohesion policy. The cohesion policy aims to reduce economic and social disparities in regional development. A part of that policy...
Competitive Perception of Small Indian Manufacturers: A study of Punjab Units
The paper aims at identifying the main competitors and competitive advantages of small scale manufacturers. The manufacturers were selected from four manufacturing industries producing textiles, bicycle and bicycle parts...
Effects of Health Insurance Concentration Market on Insurance Coverage in Colombia
This study seeks to contribute to the limited knowledge on the health insurance market in Colombia. Using a database constructed for this purpose, we describe the structure of the health insurance market in Colombia, spe...