Research On Value Promotion Of H Company Based On EVA Driver Analysis

In recent years,the State Assets Administration Committee has changed enterprise performance evaluation way to a system with EVA which can more truly reflect the financial situation and the shortcomings in the production management of a company.This situation indicates our government and market have attached more importance to the enterprise value creation.From the view of the essence of EVA,company should take equity cost into account when measuring the enterprise performance.In other words,equity cost should also be reckoned as the cost of enterprise.From the view of EVA formula,it measures the relationship between net operating profit after tax and capital cost.It can reflect the company real profit after deducting the cost of equity.The way of based on EVA enterprise performance evaluation can deeply know the process of value creation in production and operation.Then,it can find problems in these processes and give the advice to the enterprise in improving the profit and saving the investment of capital cost in order to improve the enterprise value.This article makes use of case study method,researching a non-listed company,H Company.The fact is found through studying its profit and EVA that H Company’s net profit is good enough,with its EVA value continuing low even minus instead.With regard to this issue,the financial driving factors of H company was first studied to find out the reason for the low EVA value is that business income,inventory turnover ratio and receivable account ratio are relatively low.Secondly,from the research of non-financial driving factors of EVA of H Company,we found out that there are serious problems in organization structure,material management and receivables credit management,which leading to low values of its business income,inventory turnover ratio and receivable account ratio.Three methods are provided in this article.Firstly,a cross-department group organization is set up with product manager as its leader to convey clients’ demand in time to each department exactly and objectively,making H company‘s information pass synchronously and precisely.Secondly,a customized material management system is set up,adopting purchase strategy and constructing PFEP database at the same time,making client information and supplier information peer to peer,which will make it possible that customized products are manufactured with the raw materials from suppliers.Thirdly,a clients’ credit evaluation system is established based on big data,which will make H Company more quickly and effectively access clients’ credit risk objectively,solving the issues of unreasonable or over-simple clients risk evaluation.The above measures may be some helpful to other transformer company to improve EVA value creation.The innovation of this paper lies in that to take H Company as illusion,deeply studying the common phenomenon in transformer industry that net profit showcases good with EVA value continuing low instead,we found out the negative driving factors which lowered the EVA value through analyzing financial driving factors and the ways to improve EVA and enterprise values combing the analysis of non-financial driving factors.