Advantage of Cash Value Added Concept versus Economic Value Added


 
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Advantage of Cash Value Added Concept versus Economic Value Added
Christian Schulz, Germany
The cash value added concept is based, as opposed to economic value added, on cash flow figures and therefore offers little accounting and valuation options to distort the output.
In this context, the following statement by Terry Smith is relevant: "Profits are someone's opinion... Whereas cash is a fact".

 
 
Other Criticisms of EVA Concept
Georg Meyer, Germany
Additionally the following criticisms can be mentioned on the EVA concept:
The correction of EBIT is time-consuming and complex, because it requires over 160 adjustments to calculate the "real EVA". For this reason, in practice, usually not more than 20 corrections are made ​​to simplify the calculation of EVA.
Economic Value Added is based on the periodic values ​​of the profit & loss account. The principle of congruence is not always observed in this process. The sum of the accounting period profits does not correspond to the long term sum of cash flows.
 

   











 

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