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 158
- Downloads 0
The Effect of International Business on SMEs Growth in Nigeria
The research examined the effect of international business on SMEs growth in a competitive environment, particularly Nigeria. The secondary data were gathered from the Nigerian Bureau of Statistics and the Central Bank o...
Creating a Competitive Advantage by Developing an Innovative Tool to Assess Suppliers in Agri-Food Complex
The main aim of this paper is to introduce a new certified applied methodology for Assessing Suppliers in Agri-Food Complex as a tool for company competitiveness. The work is based on the results obtained in the research...
Market Power in the Czech Banking Sector
This paper estimates the market power in the Czech banking sector during the period 2000 2010. In order to measure the degree of market power in the Czech banking sector, the authors used the Lerner index, the Herfindahl...
Design as a Condition for Prosperity in Czech Businesses - A Comparative Study
The purpose of the paper is to comprehensively review the sources of design management, business prosperity and competitiveness. The study shows the current situation in Czech businesses. Furthermore, this paper also a...
Institutionalization of Marketing in Hospitals in the Czech Republic
This paper deals with the specifics of marketing management in hospitals and the role of marketing in hospitals in the Czech Republic. Its goal is to present marketing as a tool enabling hospitals to compete in an open m...