Economic Value Added (EVA)

Economic Value Added (EVA)

A company can measure the financial performance with method eva. Young and O’Byrne (2001)  EVA is an effective communication tool both for the creation of value that can be reached by the line manager and finally pushed the performance of company and to connect with the capital markets. Sawir (2003) Term of EVA originally popularized by Stern Steward Management Service, a consulting firm in the United States around the late '90s.  Stern Steward calculate EVA by reducing operating profit after taxes with the total cost of capital (p. 48). Based on the opinion - the above opinion can be concluded that the definition of Economic Value Added (EVA) is operating profit after tax, minus the cost of capital used to assess the performance of the company with due regard to a fair expectations - the expectations of the shareholders and creditors (p.48). Economic Value Added (EVA) is a financial device for measuring the real advantages of companies and can provide information to potential investors in terms of determining which companies are allowed to provide the return of the most opimal, so that investors can decide to which companies will implanting of the capital (p.48). Tunggal (2001) The theoretical basis of the concept of EVA is presented in an academic paper published between 1958 and 1961 by two financial economists namely Merton H. Miller and Franco Modigliani, who won the Nobel Prize in economics. Merton H. Miller and Franco Modigliani argued that economic profit (economic income) is a source of value creation (value creation) in the company and that the level of return (rate of return / cost of capital) is determined based on the level of risk assumed by the investor (p.1). But Miller and Modigliani did not gave a technique to measure the economic profit of a company (p.1). Tunggal (2001) the purpose of the emergence this is idea orginated from effort of Miller and Modigliani to obtain answers to a better assessment methods.

1.      A company can measure the financial performance with method eva.

SAP 1

Subject	A company
Verb	Measure
Complement	The financial performance
Modifier	With method eva

SAP 2

Verb Phrase	Can measure the financial performance
Tenses	Present tense ( S+V1)

SAP 3

Subject – Verb Agreement

Singular Subject : ·         A company

SAP 4

Pronouns

Personal Pronouns : ·         A company = It

2.      Young and O’Byrne (2001)  EVA is an effective communication tool both for the creation of value that can be reached by the line manager and finally pushed the performance of company and to connect with the capital markets.

SAP 1

Subject	EVA
Verb	Pushed the performance of company
Complement	A company
Modifier	For the creation of value that can be reached by the line manager

SAP 2

Verb Phrase	·         The creation of value that can be reached by the line manager ·         Pushed the performance of company ·         To connect with the capital markets
Tenses	Past tense (S+V2)

SAP 3

Subject – Verb agreement

Singular Subject : EVA = It

SAP 4

Pronouns

Personal Pronouns : EVA               = It Line manager = They

3.      Sawir (2003) Term of EVA originally popularized by Stern Steward Management Service, a consulting firm in the United States around the late '90s. 

SAP 1

Subject	EVA
Verb	Popularized
Complement	By Stern Steward Management Service
Modifier	In the United States around the late '90s.

SAP 2

Verb Phrase	Term of EVA originally popularized by Stern Steward Management Service
Tenses	Past Tense (S+V2)

SAP 3

Subject – Verb Agreement

Singular Subject : ·         EVA = It

SAP 4

Pronouns

Possessive Pronoun : ·         By Stern Steward Management Service = Their

4.      Stern Steward Management Service calculate EVA by reducing operating profit after taxes with the total cost of capital (p.48).

SAP 1

Subject	Stern Steward Stern Steward Management Service
Verb	Calculate
Complement	EVA
Modifier	By reducing operating profit after taxes with the total cost of capital

SAP 2

Verb Phrase	Stern Steward Management Service calculate EVA
Tenses	Present Tense (S+V1)

SAP 3

Subject – Verb Agreement

Plural Subject: ·         Stern Steward Management Service = They

SAP 4

Pronouns

Personal Pronoun : ·         Stern Steward Management Service = They

5.      Based on the opinion - the above opinion can be concluded that the definition of Economic Value Added (EVA) is operating profit after tax, minus the cost of capital used to assess the performance of the company with due regard to a fair expectations - the expectations of the shareholders and creditors (p.48).

SAP 1

Subject	Economic Value Added (EVA)
Verb	Used to assess the performance of the company
Complement	Of the company
Modifier	with due regard to a fair expectations - the expectations of the shareholders and creditors.

SAP 2

Verb Phrase	Economic Value Added (EVA) is operating profit after tax, minus the cost of capital
Tenses	Present Continuous Tense (S + am/is/are + verb-ing)

SAP 3

Subject – Verb Agreement

Singular Subject: ·         Economic Value Added (EVA) = It

SAP 4

Pronouns

Personal Pronoun : ·         Economic Value Added (EVA) = It

6.      Economic Value Added (EVA) is a financial device for measuring the real advantages of companies and can provide information to potential investors in terms of determining which companies are allowed to provide the return of the most opimal, so that investors can decide to which companies will implanting of the capital (p.48).

SAP 1

Subject	Economic Value Added (EVA)
Verb	Measuring
Complement	A company
Modifier	For measuring the real advantages of companies and can provide information to potential investors in terms of determining which companies are allowed to provide the return of the most opimal,

SAP 2

Verb Phrase	·         Can provide information to potential investors ·         So that investors can decide to which companies will implanting of the capital.
Tenses	Present Continuous Tense (S + am/is/are + verb-ing)

SAP 3

Subject – Verb Agreement

Singular Subject: ·         Economic Value Added (EVA) = It

SAP 4

Pronouns

Personal Pronoun : ·         Economic Value Added (EVA) = It ·         Investor = They

7.      Tunggal (2001) The theoretical basis of the concept of EVA is presented in an academic paper published between 1958 and 1961 by two financial economists namely Merton H. Miller and Franco Modigliani, who won the Nobel Prize in economics.

SAP 1

Subject	Economic Value Added (EVA)
Verb	Presented
Complement	By two financial economists namely Merton H. Miller and Franco Modigliani
Modifier	In an academic paper published between 1958 and 1961

SAP 2

Verb Phrase	·         Is presented in an academic paper
Tenses	Past Tense ( S+V2)

SAP 3

Subject – Verb Agreement

Singular Subject: ·         Economic Value Added (EVA) = It

SAP 4

Pronouns

Personal Pronoun : ·         Economic Value Added (EVA) = It Possessive Pronoun : ·         By two financial economists namely Merton H. Miller and Franco Modigliani = Their

8.      Merton H. Miller and Franco Modigliani argued that economic profit (economic income) is a source of value creation (value creation) in the company and that the level of return (rate of return / cost of capital) is determined based on the level of risk assumed by the investor (p.1)

SAP 1

Subject	Merton H. Miller and Franco Modigliani
Verb	Argued
Complement	Economic profit (economic income)
Modifier	Determined based on the level of risk assumed by the investor.

SAP 2

Verb Phrase	·         That economic profit (economic income) is a source of value creation (value creation) in the company ·         And that the level of return (rate of return / cost of capital) is determined based on the level of risk assumed by the investor.
Tenses	Past Tense ( S+V2)

SAP 3

Subject – Verb Agreement

Plural Subject: ·         Merton H. Miller and Franco Modigliani

SAP 4

Pronouns

Personal Pronoun : ·         Merton H. Miller and Franco Modigliani = They

9.      But Miller and Modigliani did not gave a technique to measure the economic profit of a company (p.1).

SAP 1

Subject	Miller and Modigliani
Verb	Gave
Complement	The economic profit
Modifier	Of a company

SAP 2

Verb Phrase	But Miller and Modigliani did not gave a technique
Tenses	Past Tense ( S+V2)

SAP 3

Subject – Verb Agreement

Plural Subject: ·         Miller and Modigliani

SAP 4

Pronouns

Personal Pronoun : ·         Miller and Modigliani = They

10.  Tunggal (2001) the purpose of the emergence this is idea orginated from effort of Miller and Modigliani to obtain answers to a better assessment methods.

SAP 1

Subject	This is idea
Verb	Orginated
Complement	From effort of Miller and Modigliani
Modifier	To obtain answers to a better assessment methods

SAP 2

Verb Phrase	From effort of Miller and Modigliani to obtain answers to a better assessment methods
Tenses	Past Tense ( S+V2)

SAP 3

Subject – Verb Agreement

Singular Subject: ·         This is idea

SAP 4

Pronouns

Personal Pronoun : ·         This is idea = It

Daftar Pustaka :

Sawir, Agnes. 2003. Analisis Kinerja Keuangan dan Perencanaan Keuangan Perusahaan. Jakarta: PT Gramedia Pustaka Utama.

Tunggal, A.W. 2001. “Pengantar Konsep Economic Value Added (EVA)”. Jakarta: Harvarindo.

Young, S. David; O’Byrne, Stephen F.. 2001. EVA dan Manajemen Berdasarkan Nilai. Alih Bahasa Lusy Widjaja. Jakarta: Salemba Empat.