Economic Value Added (EVA): A Better Performance Indicator- The Case Study of Square Pharmaceuticals Limited

Abstract

Economic Value Added (EVA) attempts to understand whether a business
creates sufficient surplus to cover the cost of its capital or to fulfill the shareholders
expectation into value creation. The concept of EVA is better than that of the concept
of accounting profit as a tool of value creation because it considers the overall cost
of capital. The purpose of this study is to examine and analyze the financial
performance of Square Pharmaceuticals Limited (SPL) on the basis of traditional
measurement tools like ROCE, ROE, EPS etc and the new performance measure
EVA. The study also includes the empirical findings of a few research work done on
the theoretical relationship of EVA to other financial fundamentals. Finally, the
study findings that the relationship between ROCE and EVA highly positive
correlation and the traditional performance indicate are showing high value
compared to EVACE.