The EVA And Research Of Its Application In China-INC

EVA (Economic value added),as a new coming financial evaluation index, is well established in finance-oriented theory, but only recently has the term moved into the mainstream of corporate finance and attracts the people's increasingly attention, as more and more firms adopt it as the base for business planning and performance monitoring around the world. Simply explained,EVA is the after-tax cash flow generated by a business minus the cost of the capital it has deployed to generate that cash flow.Representing real profit versus paper profit and a residual income, EVA underlies shareholder value, increasingly the main target of leading companies' strategies.EVA is not only based on the traditional financial measurements, but also better than its long-term-running former historical evaluators. What's the main differences between the two accounting analyses, as a measure of profit-gained performance are that how to calculate the cost of the capital. There is growing evidence that EVA, not earnings, determines the value of a firm, which as follows:Earnings per share tells nothing about the cost of generating those profits. Profits also increase taxes, thereby reducing cash flow, so that engineering profits through accounting tricks can drain economic value.Concept and effect of EVA are first expatiated in this paper , then operation mode of EVA for manager is established; furthermore the effectiveness of the apply of EVA in China-INC are demonstration analyzed.finally, as far as our country, the theory of EVA still has some existent questions which need to be resolved.It is hope to give a valuable reference for Chinese enterprise to apply their EVA system.