How can Economic Value Added (EVA) statements be used to improve Essay - 2

How can Economic Value Added (EVA) statements be used to improve financial statement reporting, results, and success What are some problems found with EVA - Essay Example Making financial decisions only based on accounting data is a traditional way that can be misleading for the financial managers to make bad decisions. EVA measures are useful for the business to make decisions that can help the business to grow and help in making future ones. EVA creates the ‘value’ in the business decisions and financial management. The EVA calculations and statements are drawn by evaluating the value that has been added to the company. It shows how much the business has grown in terms of the worth it has. There are many factors that the EVA statements take into consideration to make sure that all the relevant data is considered when measuring the value of the business. It calculates how much the growth of the business is and how much has been invested for that growth. It takes out the net benefit that the business has gained and in regard of that cost that has been put in for that benefit (Grant, 2003). The EVA statements allow the business to take decisions about those projects that have to be accepted by the business. EVA statements would accept those projects that give the business a chance to experience growth and that add to the value the business. However, the financial managers will not accept those projects that seem to bring less benefit to the business and its value, no matter how much financial gain that project may bring. Although it may seem that the EVA statements neglect the financial figures, the concept is simple which suggests that decisions should be taken on account of the business’s financial health, and not taking those decisions that may financially hurt the business. EVA statements are greatly used to improve the business’s financial statement reporting, results and the future success. It allows the business to take decisions that are beneficial for the business financial position. Moreover, it allows the financial managers to evaluate the financial results in relation to