Research On Computing Method Of KM Co.,Lid’s EVA

KM Co’., Lids general meeting decided to apply the Value-Based Management from2011. However, the oirginal evaluation ROE etc. are only part of the net assets of thecompany’s revenue, it can hardly be used to evaluate the value. EVA index by net operatingprofit after tax net capital costs relfect the company’s value added, so KM company’sperformance evaluation indicators into EVA. But KM company managers and ifnancialofficers found in the search for the EVA calculation, so far scholars are given an approximatecalculation framework. In this paper, using2011data in the financial statements and otherfinancial data，calculate KM7s EVA of the company in2011to summarize the KM company’smain business, development and other specific circumstances of the EVA calculation processfor KM company in subsequent years when calculating EVA be used.In the specific operation, for the calculation of EVA KM company has the followingproblems to be solved: What is the scope in KM company EVA calculation? How to deal withKM company’s financial activities and non-recurring gains and losses effects on theCompany’s net operating profit atfer tax impact? How to distinguish total capital in operatingassets and non-operating assets? According to KM company’s current development, marketposition and strategic objectives, what are the most important adjustments? How to determinethe company’s current KM adjustments when calculating EVA? What is the specific processwhen applied EVA calculation logical steps to KM company?In the process of calculate of KM’s EVA in2011，developed in KM company EVAcalculation method, including the calculation process and specific techniques. Among them,the calculation process is: Step one: Understanding the economic implications of EVAformula; Step two: defining EVA calculation, and data preparation; Step Three: Using theadjusted project selection table filters KM company’s accounting adjustments should becarried out； Step Four: Adjust and calculate the amount of the adjustment; Step Five: Selectand estimate the capital cost; Step6: calculated and evaluated.In step two, EVA calculation includes pharmaceutical production, operation andwholesale sales and other business activities, the main core business is the assessment of theseeffects on the KM value of the company. So adjusting net operating proift, you need to financial activities (such as long-term borrowings) and non-recurring items (such as operatingincome, etc.) of excluding from profit; adjusting the total capital, you need to be non-operating assets (such as non-interest bearing current liabilities, etc.) removed.In step three, according to the accounting adjustments because there twisting anddistortion of accounting information, as well as our enterprise accounting standards (such asgoodwill and inventory requirements) and KM actual situation of the company in2011(suchas whether subjects Amount), screening required when calculating EVA accountingadjustments, a total of11，namely: interest expense, foreign exchange gains and losses,operating income, income tax expense, strategic investments, interest-free current liabilitiesOther non-operating assets, research expenses, marketing costs, a variety of asset impairment,deferred taxes. Meanwhile, KM recent years are in the business of development, andconstantly open up new product markets and geographic markets, the strategic investment andmarket development expenses costs，research costs are the focus should adjust.If KM after the company proposed calculation method used to calculate EVA，then thespecific operation，step one understand EVA, EVA deifned in step two calculation range(pharmaceutical production, operation and wholesale sales and other core business), step threein refocusing the common understanding of the purpose of the project as well as adjustmentmethod (Appendix2) can be used when calculating EVA2011results do not have to repeatthe work，the results of these steps in recent years, no major changes in the business the casecan be generic.I hope this research conclusion may provide certain reference used in calculating EVAfor KM Co., Lid’s, the industry, and the same type company.