Research On Appraisal Of Companies Value Based On Eva

With the worldwide M & A wave becoming more and more fierce, the term Business Valuation gradually comes into the public's perspective and attracts increasing attention. The correct assessment of enterprise value can ensure the management decisions to protect the increase in shareholder wealth, and also can help investors make right investment decisions. From a macro point of view, the correct assessment of an enterprise value can benefit efficient use of resources, regulating the capital market order, avoid duplication and so on. In the context of the reform in China's state-owned enterprises, the correct assessment of enterprise value can safeguard the effective operation of the state assets and also supervise state-owned assets to avoid loss.There are three common theory of business valuation: Cost, Comparison and Income approach.Among them, the income approach seems can reflect the real value of the company more reasonable under the going concern assumption, for this approach can valuate through the economic benefits for corporate shareholders. Under the income approach, discounted accounting profit model and discounted cash flow model are two common valuation models. However, the first one usually can not reflect the true company value correctly because of the affection of accounting recognition and measurement principles, and the last one can not be wildly used in the really world for it is difficult to predict the cash flow of a company in the future. In this backgrounds, the economic value added (Economic Value Added, EVA) came into being.EVA creatively considering the operating profits as well as the total capital costs, thus it can directly measure the increase or damage to the shareholder value more accurately. EVA has caused a"EVA revolution"in the western world, now there are more than 500 companies which are applying EVA in there management. SASAC issued《Interim Measures of Performance Evaluation to Persons in Charge of the Companies Belonging to the Central Government》in 2009, which indicates the recognition and attention to the EVA from government. At present, EVA has been applied in the company management wildly, but in the area of business valuation, it is still in the exploratory stage. Nevertheless, many foreign investment banks have begun to try to use EVA in the business valuation in the 1990s. The results showed that valuation results based on EVA are closer to the true value of the companies than other index.This paper analyzes the valuating function of EVA and the discounted model based on EVA. The difficulty of EVA applying is about its great range of accounting adjustments and for different industries, the rules of adjustments also different. This paper tries to offer some reference ideas to practical valuation through analyzing some principles of EVA accounting adjustments and then summarizes the adjustments into several categories. In addition, through analyzing the using of business valuation model based on EVA in the case of Yunnan Chihong Zinc&Germanium Co., Ltd, this paper tried to demonstrate the correctness of the EVA valuation model and also hope offer some useful inspiration to practical business valuation.