Eva Evaluation Of Analytical Methods And Their Use Of Commercial Banks

There are all kinds of performance metrics in analyzing a company, such as EPS (earnings per share) ,ROS (return on assets), DCF (discounted cash flow), ROE (return on capital), EVA (economic value added). Though they all can run very well in some fields, EVA is the most appreciated with its explicit and usefulness. From 1990s, most companies in western countries began to use EVA, now it has been used widely for its superiority.In this article I want to certify the usefulness of EVA through analyzing the concept of it and I want to make a conclusion that it is effective to use EVA in a commercial bank. Through analyzing, we can conclude that EVA has the following strength: First, there exist high correlation between the performance measure of EVA and the company's goal of value because EVA measuring the cost and risk of capital and it adjust the financial statement suitably. Second, it is subjective without the influence of accounting adjustment. Third, it consider the company's result both long term and short term. The forth, it can be operated easily. The fifth, it can balance the relationship between the stakeholder, so it can reduce the cost of agent. And last, EVA can be used in company's compensation system because of its high correlation with company's value goal, so the compensation system will be equal and efficient based on the performance measure of EVA.Farther I want to explain how to use EVA on a higher level through with the measure of RAROC and the ratio of capital to risk assets in a commercial bank.