The Study Of China Railway Corporate Value Based On The EVA Approach

ABSTRACT:In China, the net return on assets and other traditional accounting profit target has been the standard measure of performance of the company, but also naturally become the primary business objectives of management and incentive benchmarks. But the main drawback of these indicators did not fully consider the actual cost of capital of enterprises, especially the cost of equity capital, can not objectively reflect the real value of the enterprise; with its performance evaluation system based on corporate management will inevitably lead to short-term management actions, earnings manipulation and other issues. Therefore, to find and introduce more effective performance evaluation and management system is imperative.EVA is the acronym of Economic Value Added. It is formally proposed by the Stern Stewart company in 1982, a United States company. Its core concept:A business can bring value for shareholders only when its capital gains over the proceeds invested to get the full cost of capital. Attention to the cost of capital, especially the cost of equity capital is the obvious characteristics of EVA. Because of the outstanding merits in the performance evaluation and management, many well-known international companies have introduced EVA and have achieved remarkable results. But in China, EVA is a new concept, how to introduce the advanced concepts and management methods, to establish the EVA management system, and to reflect the interests of shareholders is an important research topic.In this paper, we have used case study method to discuss the Corporate Value based on the EVA approach, and discussed with the traditional accounting methods to assess the difference between enterprise value and advantages. Paper is divided into five parts: the background, EVA concept and its application of business valuation theory, application problems and the main points of EVA target, the case study of China Railway Corporate Value based on the EVA approach, conclusions. This paper have reflected the advantages of EVA enterprise value evaluation system by calculating the EVA of China Railway Corporate, comparing with the traditional accounting indicators. And have provided theoretical and empirical support to further promote EVA value assessment system in China.