The Application Of EVA Theory In Military Research Institute

How to evaluate the value and performance of an enterprise has always been a common topic in academic and business circles.Enterprise performance evaluation is not only related to the measurement of the enterprise's operating results,but also to the rights and interests of the investors.Therefore,the enterprise should establish a scientific and practical performance evaluation method.In our country,the state-owned enterprise(SOE)has occupied the most important position in the national economic system,and its operation has a direct impact on the overall economic environment of our country.State owned assets supervision and Administration Commission(SASAC),as the controller of state-owned enterprises,needs to evaluate the performance of state-owned enterprises every year.But the traditional evaluation methods can not play a strong role in the constraints of the "agency problem".With the continuous development of market economy,the traditional approach has been unable to meet the requirements of the development of enterprises and the supervision of government.The emergence of EVA assessment is adapted to the requirements of the performance evaluation indicators in the current state-owned enterprise governance.The greatest feature of EVA evaluation method is to calculate the cost of owner's equity,also known as the investment cost of shareholders.The method makes the profits of the enterprise close to the concept of "economic profit",rather than of the traditional accounting profit,reflecting that the core interests of modern enterprise management is to maximize shareholder's value.".EVA examination fully coordinates the contradiction between the owner and operator of the state-owned enterprise.With the incentive and restraint mechanism,the managers of state-owned enterprises will be diligent and responsible for enterprise's management,achieving the goal that the state-owned asset appreciation will be appreciated.EVA assessment is the most suitable way to appraise corporate operating results.In China,the state-owned enterprise,especially the state-owned key enterprise,is different from the western company which is seek for profits only.Chinese SOE has to be responsible for national strategy works.The military research institute,as a special part of Chinese SOE,does not participate in market competition yet.Therefore,if we just calculate a financial index through the EVA formula,the results will not only be helpless to evaluate the performance of the military research institute,but also be useless to guide for corporate management.Based on the above considerations,the target of this essay is to discover the effective way for military research institute to evaluate enterprise operating results.The study will take C Institute as an example,which is the subsidiary of China Aviation Industry Corp.The full text is divided into seven parts:The first part is the introduction,which briefly introduces not only the background and purpose of the study,but also the ideas and frameworksThe second part introduces the basic principle of EVA.After reviewing the history,the development and the formula of EVA,the study will focus on the “4M” method established by Stern and Stewart Co.,which can help enterprise to establish corporate performance evaluation system,internal management mechanism,incentive mechanism and corporate culture.The third part is the analysis of the current performance evaluation of military research institute.This paper summarizes the general situation of military research institutes in our country and analyzes the characteristics of business,accounting and performance evaluation.Meanwhile,this paper analyzes and evaluates the traditional performance evaluation methods of SOE key enterprises and military research institutes.The fourth part is the comparison of several performance evaluation methods of military research institute.From the financial sector,non-financial sector,the necessity sector and feasible sector,this paper explain the reasons why military research institute choose EVA assessment to appraise the performance.Taking C Research Institute as an example,the fifth part introduces the calculation and decomposition process of EVA index,and explains the way to use the results combining with the management of C institute.The sixth part analyzes the problems found in the application of EVA assessment of C Institute.In this paper,the author explains the reasons why the cost of capital is not in line with the actual cost of the institute.After that,this paper illustrates the necessity of introducing non-financial evaluation index to evaluate corporate performance comprehensively.At the end,the paper prospects the development of EVA evaluation in the future.Although the EVA assessment is not a good reflection of the true value of military research institutes,the idea of EVA can still promote the ability of decision making in C Institute.And the application is also worth to reference by other military institutes.The seventh part summarizes the full text.