Enterprise Performance Evaluation Theory And Applications

This paper studies business performance measurement theory and its application deeply. Firstly, traditional performance measures are introduced. As for the shortcomings of traditional methods, some innovation was made, including improvement of financial measures and the proposal of non-financial measures. Secondly, a conceptual framework regarding EVA is presented roundly. The theoretical origin and basic principle of EVA, and the adjustments to GAAP for calculating EVA are generalized. After discussing traditional compensation incentive system, the application of EVA to compensation incentive system is expounded systematically, including the calculation of bonus amount, bonus bank and leveraged stock option. As compared with traditional measures, the advantages of EVA system are analyzed. Moreover, several major problems which should be paid attention to are brought forward, such as the confirmation of capital cost, the validity of accounting adjustments, and the actual effect to prevent from income manipulation. Thirdly, the theoretical frame and four components of Balanced Scorecard are illustrated. Then the paper investigates how to use Balanced Scorecard in detail. Upon the research above, comparison is made between EVA and Balanced Scorecard. Finally, in combination with a specific case- Xi'an Aircraft Industry Group Company LTD., some problems are found in its performance measurement and compensation incentive system through field survey. The paper provides some useful suggestion for improvement. Furthermore, a new Balanced Scorecard is designed for its subsidiary company- Xi'an Aircraft Aluminum Industry Co. LTD. The attempts made in this paper are expected to be beneficial to domestic companies in applying these theories to develop their performances.