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Title: The EVA Challenge: Implementing Value Added Change in an Organization by Joel M. Stern, John S. Shiely, Irwin Ross ISBN: 0471405558 Publisher: John Wiley & Sons Pub. Date: 02 February, 2001 Format: Hardcover Volumes: 1 List Price(USD): $29.95 |
Average Customer Rating: 4.71
Rating: 5
Summary: Highly Recommended!
Comment: Authors Joel Stern and John Shiely advocate a total revolution in the way companies are valued and measured. They make a convincing case for using EVA ("Economic Value Added") as the primary measure of corporate performance. The authors argue that the SEC's yardstick for corporate reporting, the "Generally Accepted Accounting Procedures" (GAAP), was designed to protect lenders by depicting a company's liquidation value. As such, GAAP provides an overly conservative and only marginally accurate picture of financial health. EVA principles - at least according to the consultants who advise companies on using them - evaluate intangible assets more realistically and correspond more closely to stock market performance. We from getAbstract recommend this book to executives who seek improved corporate financial and market performance, and to investors interested in understanding how value is created and maintained.
Rating: 5
Summary: Aligning Shareholder and Manager Interests
Comment: One of the most difficult questions to answer is what a company's worth is. Two developments in American Capitalism have contributed to the question's complexity. First, shareholders have divorced themselves from the corporations operation, leaving the task to professional managers.
Second, generally accepted accounting principles do not align expenses with benefits, distorting economic reality. As a result, investors who want to compare the cash they can take out of a company with the cash they have invested are hampered.
The authors argue Economic Value Added (EVA) is a true measure of a company's economic performance, in addition to being a strategy for creating shareholder value. Properly implemented, they state, EVA frees the measurement of corporate performance from the vagaries of accounting principles and gives both shareholders and management a clear picture of the value the company creates.
EVA is the profit that remains after deducting the cost of the capital invested to generate that profit or EVA = Net Operating Profit After-Tax minus capital charge. Effectively implemented, the tool becomes the basis for an incentive plan that rewards managers for actions that increase shareholder returns and vice versa.
John S. Shiely, president of Briggs and Stratton and co-author of the book, notes this strategy provided the foundation of his company's turnaround. In 1989, the world's largest producer of air-cooled engines had an EVA of negative $62 million based on $1.3 billion in sales. By re-organizing and focusing its strategy while developing its EVA program, the company staged a dramatic turnaround. By 1999, it reported a record positive EVA of $50.9 million. Shareholders, who bought $100 worth of stock at the beginning of the program, saw it increase in value to $673 in 1999.
The authors claim EVA is ideal for knowledge-based companies making heavy infrastructure investments today for any anticipated return later. EVA treats cash outlays that represent investments as capital rather than expenses. The capital in these knowledge based industries consists of research, development, marketing, advertising and start-up costs. Accounts view these expenditures as expenses, but it is realistic to capitalize them and amortize them over their useful lives.
Rating: 3
Summary: EVA from a Senior Management Perspective
Comment: EVA Challenge was OK. It is more geared towards senior managers who are thinking about EVA as a model for their companies. In that regard, this books does a fine job.
I was hoping the book would deal with more of the matamatics associated with defining EVA in relation to various projects and business decisions. This book contailed very little information in this regard.
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Title: The Quest for Value by G. Bennett Stewart ISBN: 0887304184 Publisher: HarperBusiness Pub. Date: 15 January, 1991 List Price(USD): $50.00 |
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Title: EVA and Value-Based Management: A Practical Guide to Implementation by S. David Young, Stephen F. O'Byrne ISBN: 0071364390 Publisher: McGraw-Hill Trade Pub. Date: 22 November, 2000 List Price(USD): $45.00 |
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Title: EVA: The Real Key to Creating Wealth by Al Ehrbar ISBN: 0471298603 Publisher: John Wiley & Sons Pub. Date: November, 1998 List Price(USD): $34.95 |
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Title: Foundations of Economic Value Added by James L. Grant ISBN: 1883249244 Publisher: John Wiley & Sons Pub. Date: August, 1997 List Price(USD): $49.95 |
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Title: Balanced Scorecard Step-by-Step: Maximizing Performance and Maintaining Results by Paul R. Niven ISBN: 0471078727 Publisher: John Wiley & Sons Pub. Date: 15 March, 2002 List Price(USD): $45.00 |
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