R.A. Andrutsky Chief economist for business planning of NII TK LLP, Master of Economics
Journal "Accounting and Finance", No. 7 for 2008

Balance (‘000 cu)

Assets		Liability and capital
Current assets		Short-term liabilities
Cash and their equivalents		Short-term financial liabilities
Short-term receivables		Short-term accounts payable
		Other current liabilities
Other current assets		long term duties
Long-term assets	2 833 000	Long-term financial liabilities
Long-term accounts receivable		Capital	1 723 000
Fixed assets		Issued capital
Intangible assets
Other long-term assets		Retained income (uncovered loss)
Balance	3 198 000	Balance	3 198 000

Profit and loss statement (‘000 cu)

Sales income
Cost of sales, incl.
Operating expenses
Depreciation
Administrative expenses
Marketing expenses
Profit from operating activities
Interest expenses
Profit (loss) before tax
CIT expenses, 30%
Total profit (loss) for the period

In the first step, we will determine NOPAT using data from the Income Statement. Then, in subsequent calculations, we use the balance information. In the second step we calculate ACE. To do this, the company's interest liabilities are added to the capital. Next, WACC is determined taking into account the tax shield on debt capital. And in the fourth step we calculate EVA.

1. NOPAT = 535,000 − 123,000 = 412,000 USD

2. ACE = 1,723,000 + 850,000 + 275,000 = 2,848,000 USD

3. WACC = 0.37 × 12% + 0.63 × 14.7% × (1 − 0.3) = 11%

4. EVA = 412,000 − 11% × 2,848,000 = $100,903

The resulting EVA indicator > 0, that is, the company creates added economic value shareholders.

Conclusions.

EVA strategy is one of the most popular initiatives in the field of value-based management, which allows you to radically reconsider the company's goals and values. The company must be fairly assessed by both potential investors, clients, partners, and owners, so EVA retains its place in the system of key indicators and, in addition to other functions discussed in this article, constantly reminds of the role of the company's owners. EVA in the management system allows for strategic and operational planning, measurement and control of results. I think that for a company aimed at creating value for shareholders, the relevant question will not be “to use or not to use EVA in management?”, but the question “how and to what extent to use EVA?”

1 The data is fictitious.

2 The example shows a simplified version of the definition of ACE; in practice, it is recommended to take the average values ​​of the elements of this indicator at the beginning and end of the reporting period.

Economic Value Added, EVA is economic value added. The indicator answers the questions: what additional income a company creates with invested capital, whether the owners will receive a profit. Standard balance sheet and income statement data can be used to calculate EVA. Details are in the article.

What is EVA

The concept of Economic Value Added (EVA) was developed in the late 80s by Joel Stern and Bennett Stewart.

EVA is the difference between a company's profit and its cost of capital. Sounds simple. But if we follow the position of the authors, then calculating EVA will require about 160 adjustments to the profit value. In practice, it is easier to estimate the value of the indicator.

Classic EVA formula

Calculating EVA using the classic formula proposed by Stewart and Stern looks like this:

EVA = NOPAT – WACC × CE,

where NOPAT (Net Operating Profit After Tax) is after-tax operating profit excluding accrued interest on loans and received loans, rub. When calculating it, all income and expenses of the enterprise reflected in the income statement, including income tax, are taken into account. To determine NOPAT, interest payable must be added to the net profit of the reporting period.

CE (Capital Employed) – invested capital, rub. .;

WACC (Weighted Average Cost of Capital) – weighted average cost of capital,% per year, which is calculated by the formula:

WACC = r LC × LC: CE + r OC × OC: CE,

where rLC – average cost borrowed capital, % per year;

LC (Loan Capital) – borrowed capital or capital received in the form of debt obligations, rub.;

OC (Own Capital) – equity capital invested by the founders in the enterprise, rub.;

r OC – cost of equity capital, % per year. It is determined by shareholders and shows the minimum level of return that they expect to receive on their invested funds.

Formula for calculating EVA based on accounting data

The EVA formula can be converted into a more convenient form for calculations based on accounting data:

EVA = Net profit – r OC × OC.

Then it's a matter of technology. The value of net profit is taken from the income statement (p. 190), equity - from the balance sheet (p. 490, value at the beginning of the period). It remains to determine the cost of equity capital (rOC). (See also roe return on equity.) In practice, most often it is equated to the profitability that the owner wants to see. If a specific figure is not specified, you can use the formula:

r OC = r wr × β,

where r wr is the average rate of low- and risk-free investments (for example, the rate on deposits in highly reliable banks), % per annum;

β is an additional payment for risk when investing capital in a specific enterprise (in % per annum) required by the investor.

The amount of risk payment is individual for each enterprise and is determined by shareholders. Naturally, such data is not available in the financial statements. If the founders have not voiced their wishes - how much additional they want to receive for their risks, then the following can be used to estimate this indicator:

• , if it was determined at the stage of the decision to open an enterprise;
• average market return on equity for enterprises in this industry.

What adjustments should be taken into account when calculating economic added value?

Before proceeding with the calculation of economic added value, it is necessary to adjust the financial statements - to bring the profit and invested capital, calculated according to accounting standards, closer to real ones. monetary values. Read how to correctly calculate EVA by making the necessary adjustments to financial statements companies.

Step-by-step algorithm for calculating EVA by balance

I’ll show you step by step how to calculate it from financial statements, using the example of the conditional company “Delta Co.”

Step 1. Bring your balance sheet and other reporting to a convenient form

• balance sheet (No. 1);
• reports on financial results(No. 2) and changes in capital;
• explanations of the reports that will be required to calculate the EVA indicator.

Bring accounting forms No. 1 and No. 2 to a unified form. The main framework of the table was developed by McKinsey, and I adjusted it to calculate EVA according to RAS.

To correctly convert the balance sheet, copy the values ​​of the articles “Initial cost of fixed assets”, “Initial cost of intangible assets”, “Goodwill” and depreciation data from the notes to the financial statements. The balance sheet currency will remain the same as in the standard report (see Table 1). Similarly with the balance sheet, transform the income statement (see Table 2).

Table 1. Transformed balance sheet, thousand rubles. (fragment)

	Index	Source
	Deferred tax assets
	Initial cost of fixed assets
	Residual value of fixed assets
	Initial cost of intangible assets	Explanations to the financial statements
	Residual value of intangible assets	page 1110 + page 1120
		Explanations to the financial statements
	Total non-current assets	page 1170 + page 1180 + page 1190 + page 1150 + page 1110 + page 1120
	Accounts receivable
	Financial investments (excluding cash equivalents)
	Total current assets	page 1200 = page 1210 + page 1220 + page 1230 + page 1240 + page 1250 + page 1260
	Authorized capital ()
	Retained earnings (uncovered loss)
	Total equity	page 1310 + page 1340 + page 1350 + page 1360 + page 1370
	Long-term borrowed funds
	Deferred tax liabilities
	Estimated liabilities
	Other obligations
		page 1521 + page 1522
	Tax debt	page 1523 + page 1524

table 2. Transformed statement of financial results, thousand rubles. (fragment)

	Indicator name	A source of information
	Cost of sales
	Depreciation in cost	Explanations to the financial statements
	Other depreciation	Explanations to the financial statements
	Cost without depreciation
		Explanations to the financial statements
	Selling and administrative expenses without depreciation	(p. 2210 + p. 2220) – paragraph 4
	Income from participation in other organizations
	Interest receivable
	Percentage to be paid
	Earnings before taxes and interest	item 1 – item 2 – page 2210 – page 2220 – item 11
	Profit (loss) before tax
	Other income
	other expenses
	Non-operating profit/loss	clause 9 clause 14 – clause 15
	Current income tax
	Change in deferred tax liabilities
	Change in deferred tax assets
	Net income (loss)

Indicate the cost, commercial and administrative expenses in the form without depreciation; we will highlight it as a separate indicator. Take the values ​​from the notes to the financial statements. “Retained earnings” and “Dividends” can be found in the statement of changes in equity.

Step 2: Calculate your net operating income

The basis for calculating EVA is net operating profit after taxes (NOPAT). Subsequently, we subtract from it the product of the invested capital and its cost.

Take the converted income statement. Calculate net operating income using the formula:

NOPAT = EBIT – N + OtN (2)

Where , rub.;

EBIT (Earnings before interest and taxes) – profit before taxes and interest, rub.;

N – adjusted income tax, rub.;

FromN – change in deferred tax liabilities and assets, rub.

To find earnings before interest and taxes, use the formula:

EBIT = B – C – C&L – A (3)

where EBIT is profit before taxes and interest, rub.;

B – revenue, rub.;

C – cost without depreciation, rub.;

C&U – commercial and administrative expenses without depreciation, rub.;

A – depreciation, rub.

Calculation example

For the company "Delta and Co", profit before taxes and interest in 2015 amounted to 83,858 thousand rubles (291,287 - 121,207 - 48,160 - 37,599 - 463). We calculate the remaining years by analogy. The base for adjusting the income tax will include interest payments and income, as well as items that do not relate to the main activity:

• income tax reserve (line 2410 + line 2430 – line 2450 + line 2460);
• tax protection on interest payable (line 2330 × tax rate 20%);
• tax on interest receivable (line 2320 × tax rate 20%);
• tax on profits from non-core activities, if any.

The adjusted tax in 2015 is equal to 13,347 thousand rubles (10,726 thousand rubles + 893 thousand rubles – 130 thousand rubles + 11 thousand rubles + 14,414 thousand rubles × 0.2 – 5181 thousand RUR × 0.2 + 0). The years 2014 and 2015 can be calculated similarly.

Change deferred taxes of the current and last year, find according to the balance sheet data for 2015 and 2014: the difference between IT and SHE for 2015 (line 1420 - page 1180) minus the difference between IT AND SHE for 2014. In the example, the deferred tax is equal to 1,145 thousand rubles ((15,070 – 1,354) – (14,046 – 1,475)). Similarly, determine the indicators for 2014 and 2013.

We have all the metrics to find net operating income. Let’s substitute the found values ​​into the formula for net operating profit after taxes for the company for 2015 and get 71,656 thousand rubles (83,858 – 13,347 + 1145).

Step 3: Find your invested capital

Let's calculate the amount invested in the main activity. Do not take into account income from non-core assets. We use the formula:

IC = CHOB + CHOS + Pr (4)

where IC is the capital invested in the main activity, rub.;

CHOB - clean working capital(p. 1200 – p. 1240 – (p. 1521 + p. 1522 + p. 1523 + p. 1524)), rub.;

NOS – net fixed assets – residual value of fixed assets and intangible assets (line 1150 + line 1110 + line 1120), rub.;

Pr – other operating assets and liabilities (line 1190 – line 1450 – line 1550 – line 1430 – line 1540), rub.

Let's calculate net working capital:

CHOB = OA – KFV – (KZ + Zn) (5)

where NER – net working capital, rub.;

OA – current assets(p. 1200), rub.;

KFV – short-term financial investments (line 1240), rub.;

KZ – accounts payable (line 1521 + line 1522), rub.;

Zn – arrears of taxes and contributions (line 1523 + line 1524), rub.

Calculation example

Invested capital at the beginning of 2015:

NOR = 99,667 – 55,160 – (25,621 + 3597 + 5936 + 986) = 8367 thousand rubles.

NOS = 200,964 + 342 = 201,306 thousand rubles.

Pr = 34,176 – 2303 – 14,631 – 4958 – 7372 = 4912 thousand rubles.

IC = 8367 + 201,306 + 4912 = 214,585 thousand rubles.

Step 4: Evaluate return on invested capital

To calculate EVA on the balance sheet, we will calculate what return the company receives from the money invested. To do this, we find the ratio of net operating profit after taxes to capital:

ROIC = NOPAT: IC × 100% (6)

where ROIC (Return on invested capital) – return on invested capital, %;

NOPAT – net operating profit after taxes, rub.;

IC – invested capital at the beginning of the year, rub.

Calculation example

For the Delta and Co. company, the return on invested capital for 2015 is 33.393 percent (71,656 thousand rubles: 214,585 thousand rubles × 100%).

Specify the ROIC value to the nearest hundredth, otherwise there will be a noticeable difference in subsequent calculations.

Step 5: Determine Economic Value Added EVA

To determine economic value added, we lack the weighted average cost of capital:

WACC = Ks × Ws + Kd × Wd × (1 – T) (7)

where WACC (Weight average cost of capital) – weighted average cost of capital, %;

Ks – cost of equity capital,%;

Ws – share of equity capital, units;

Kd – cost of borrowed capital, %;

Wd – share of borrowed capital, units;

T – profit tax rate, units.

For Delta Co, we take return on assets as the cost of equity. The tax rate is 20 percent. Substitute the values ​​into formula (8) and find that the WACC is equal to 11.68 percent (10.2% × 0.35 + 15.6% × 0.65 × (1 – 0.2)).

Let's use an alternative formula to calculate economic added value:

EVA = IC × (ROIC – WACC) : 100% (8)

where EVA is economic value added, rub.;

IC – invested capital, rub.;

ROIC – return on invested capital, %;

WACC – weighted average cost of capital, %.

An example of calculating EVA on a balance sheet

Hence, the company created economic added value for its shareholders in 2015 of 46,592.5 thousand rubles (214,585 thousand rubles × (33.393% - 11.68%): 100%).

Let's double-check the correctness of the calculation of the indicator using formula 1. The added value of the company is equal to 46,592.5 thousand rubles (71,656 - 214,585 × 11.68: 100). The numbers agree.

If the company maintains added economic value at the level of 46 thousand rubles or manages to increase it, the business has good prospects for further development.

Table 3. Weighted average cost of capital

Three ways to increase EVA

1. Increase operating profit while constantly spending on capital.
2. Additionally, invest in projects whose profitability is higher than the cost of raising money.
3. Free up capital. If a company has invested money in an activity or property whose income does not cover the cost of capital, it can sell this resource and receive funds.

IN general outline, the main idea of ​​the management concept economic added value company is that management should be aimed at ensuring growth in the market value of the enterprise and its shares. Those. all the company's aspirations, analytical methods and management techniques should be directed towards one common goal: to help the company maximize its value by basing the management decision-making process on key value factors. Due to their enormous practical significance, issues within the framework of the concept of value management have been widely reflected in scientific and practical research.

Employees of the consulting company made a great contribution to the popularization of this approach to management McKinsey. Book of company partners Tom Copeland, Tim Koller And Jack Murrin « Company value: valuation and management"became a bestseller of business literature in many countries of the world, including in Russia. We can also talk about the formation of a number of schools represented by various consulting companies (Stern Stewart & Co, Marakon Associates, McKinsey & Co, PriceWaterhouseCoopers, L.E.K. Consulting, HOLT Value Associates, etc.), promoting their own value management systems.

Significant contributions to the development of the EVA management concept have been made by Bennett Stewart. The result of the research was the book “ The quest for value: a guide for senior managers", published by Harper Business in 1990. The book was the result of the activities of the consulting company Stern Stewart & Co, founded by Stewart in the 80s, which has a registered trademark EVA (Economic Value Added). Let us dwell in more detail on the analysis of this concept.

The system of indicators characterizing the company's activities within the framework of the EVA management concept is constantly updated. With the introduction of modern information technologies, the emergence of new ideas, indicators become more objective and complex (Figure No. 1).

Figure 1. Tree of indicators used as part of company value management

EVA cost estimation and management method(Economic Value Added) is based on the concept of residual income proposed by Alfred Marshall, which, due to the actualization on the part of investors of issues related to maximizing income for shareholders, has become widespread.

Federal State Educational Institution of Higher Professional Education Financial Academy under the Government of the Russian Federation (FINACADEMY)

Department of Valuation and Property Management

Abstract on the topic:

"Economic added value

( EVA )»

Performed : student of FM group 4-2

Kalabashkina E.

Scientific supervisor: Tulina Yu.S.

Moscow

Introduction

In the 1970s - 1980s, companies in developed countries arose the question of developing a new mechanism financial management. This was explained by the fact that the methods of assessing the company’s activities that existed before that time could no longer meet the growing requirements of managers, since they did not allow assessing the company’s activities in the long term. In addition, investors began to demand from company management a constant increase in the value of the company - an indicator reflecting the level of well-being of shareholders.

The concept of economic value added (EVA™), developed in the USA in the 80s of the last century, solved the problems posed. Based on the principle of economic profit, the EVA indicator could be used to determine value, as well as to characterize the long-term activities of the company.

This concept quickly began to be used by leading American companies, such as Coca-Cola, General Electric. Soon, their experience began to be adopted by companies (including small ones) in other countries.

Russia currently has the opportunity to borrow the most advanced foreign technologies and business methods, which always gives the “catching up” country an advantage over the “overtaking” one. In this regard, it is important for domestic companies to immediately implement and use advanced management mechanisms. The use of the concept of economic added value, which is one of the advanced concepts of financial management, will allow domestic firms to increase operational efficiency and reduce the gap with foreign competitors.

Despite the positive experience of use abroad, the concept of economic added value is currently little used by Russian companies. The main reason for this is the difficulty of its application “in pure form"in the Russian economy. Accordingly, determining the possibility and developing mechanisms for using the concept of economic added value in the financial management of Russian companies is an urgent task of financial science.

The object of this study acts as a process of financial management of a company.

Subject of study– company financial management mechanisms based on the concept of economic added value.

Theoretical and methodological basis of the study composed primarily of works by foreign specialists in the field of corporate finance, valuation, company value management and, in fact, the concept of EVA.

Among the classic works of finance theory, the works of F. Modigliani, M. Miller, E. Fama and W. Sharp, S. Ross, S. Pratt should be highlighted.

Of the works devoted to the concept of EVA, first of all, it should be noted the work of its author B. Stewart “The Quest For Value: a Guide for Senior Managers”, as well as the book by D. Young and S. O’Byrne “EVA and Value-Based Management: a Practical Guide to Implementation". Among the empirical works that examine the results of implementing EVA in practice, it is worth highlighting the works of S. Weaver, G. Biddle and R. Bowen.

In the 70-90s, two concepts for assessing the cost and efficiency of enterprises appeared, among which the most popular in last years are balanced scorecard(BSC) and economic added value(EVA).

Development of a paradigm for determining the cost and efficiency of a company

1920s	1970s	1980s	1990s
· Du Pont Model; Return on Investment (ROI)	· Net earnings per share (EPS); · Ratio of share price and net profit (P/E)	· Ratio of market and book value of shares (M/B); · Return on equity (ROE); · Return on net assets (RONA); · Cash Flow	· Economic value added (EVA); · Earnings before interest, taxes and dividends (EBITDA); · Market value added (MVA); · Balanced Scorecard (BSC); · Total shareholder return (TSR); Cash flow return on invested capital (CFROI)

2. Economic value added (EVA): essence, formula for calculation, meaning.

In Russian-language economic literature, the concept of EVA is considered only in individual works, almost exclusively in translations. EVA is important financial indicator– relatively recently (in the early 90s of the last century) it began to be actively used by many corporations in the USA and some other countries (for example, let’s name AT&T, QuarkerOats, Briggs & Stratton, Coca-Cola).

Economic value added ( EVA) represents the enterprise's profit from ordinary activities minus taxes, reduced by the amount of payment for all capital invested in the enterprise.

The indicator is used to assess the efficiency of an enterprise from the position of its owners, who believe that the activity of the enterprise has a positive result for them if the enterprise managed to earn more than the return on alternative investments. This explains the fact that when calculating EVA, not only the fee for using borrowed funds, but also equity capital is deducted from the amount of profit. It can be argued that this approach is more economic than accounting.

The author of the concept of “economic added value” D.B. Stewart defined this indicator as the difference between net operating income and cost of capital, i.e. E V.A. allows you to estimate the real economic profit at the required minimum rate of return.

Economic value added is an indicator of the annual profitability of an enterprise, which primarily shows shareholders whether the enterprise has managed to create additional value. EVA can also serve as a goal for senior management and be used in a motivation system.

Logic of the indicator EVA is as follows: Net operating income after taxes is the income received after subtracting expenses and depreciation. Part of this income goes to pay the costs of using resources (expressed in the costs of equity and borrowed capital), and the other part is the created value, which is measured by E V A. This concept is based on the fact that it is not enough for a company to have a positive financial result or an acceptable level of income per share; any economic entity in the course of its economic life must reach a level of development at which it is possible to create new value. And it is created only when the company receives a return on invested capital that exceeds the cost of raising capital.

Economic added value is calculated using the formula:

EVA = NOPAT - Capital = NOPAT - WACC * C.E.

EVA ( Economic Value Added ) - economic added value.

NOPAT ( Net Operating Profit After Tax ) - net profit received after paying income tax and minus the amount of interest paid for the use of borrowed capital. That is, this is net profit according to the financial statements (according to the Profit and Loss Statement) taking into account the necessary adjustments.

Capital ( Cost Of Capital ) - the total cost of capital of the company (consists of equity and debt capital, measured in absolute units).

WACC ( Weight Average Cost Of Capital ) - weighted average cost of capital (measured in relative terms - in %), this is the cost of total capital (equity and debt).

C.E. ( Capital Employed ) - invested capital. Represents capital, determined taking into account the cost of resources not included in the balance sheet. Calculated by adjusting financial reporting data.

Cost of invested capital ( C.E. ) is calculated using the formula:

C.E. = T.A. – NP , Where

T.A. ( Total Assets ) - total assets (balance sheet),

NP ( Non Percent Liabilities ) - non-interest-bearing current liabilities (on the balance sheet), that is, accounts payable to suppliers, the budget, advances received, other accounts payable.

Weighted average cost of capital ( WACC ) is calculated using the formula:

WACC = Ks *Ws+ Kd * Wd * (1 - T), Where

Ks- cost of equity (%),

Ws- share of equity capital (in%) – on the balance sheet,

Kd- cost of borrowed capital (%),

Wd- share of borrowed capital (in%) – on the balance sheet,

T- income tax rate (in%)

Cost of equity ( Ks ) is calculated using the method CAPM :

Ks = R + b * (Rm - R) + x + y + f, Where

R- risk-free rate of return (for example, deposit rate) (%),

Rm- average return on shares on the stock market (%),

b- beta coefficient, which measures the level of risk,

x- premium for risks associated with insufficient solvency (%),

y- premium for the risks of a closed company associated with the inaccessibility of information about financial condition and management decisions (%),

f- country risk premium (%).

Cost of borrowed capital ( Kd ) is calculated using the formula:

Kd = r * (1 - T ), Where

r- annual interest rate for the use of borrowed capital,

T- income tax rate.

From the formula for economic added value we can derive relative indicator "Return on invested capital" ( Return on Capital Employed , ROCE ). The economic meaning of this indicator is that economic value added (EVA) arises in the company if, over a given period of time, it was possible to earn a return on invested capital (ROCE) higher than the investor's rate of return (WACC).

Investors (owners, shareholders) will not consider themselves satisfied if the return on their capital earned in the company does not reach the barrier rate of return they set.

This principle of forming the value of a company is expressed in the indicator of economic value added (EVA):

EVA = Spread * CE = (ROCE - WACC) * CE

Spread– yield spread (difference) between the return on invested capital and the weighted average cost of capital. The spread represents economic value added in relative terms (in %).

Spread = ROCE – WACC

If Spread is positive, then the company has earned a return that exceeds the return required by investors. In this case, the return on capital invested in the company is higher than the alternative return for the investor, because all alternatives are assessed and taken into account in the weighted average cost of capital (WACC) indicator. Consequently, the final result - the emergence of economic added value means an increase in the value of capital for a given period.

ROCE (Return on Capital Employed)- Return on invested capital:

ROCE = NOPAT / CE

Essence EVA is manifested in the fact that this indicator reflects the addition of value to the market value of the enterprise and the assessment of the efficiency of the enterprise by determining how this enterprise is valued by the market.

Market value of the enterprise = net assets (at book value) + EVA future periods, reduced to the present time

The EVA value determines the behavior of the owners of the enterprise in relation to investing in this enterprise:

1. EVA = 0 , i.e. WACC= ROI and the market value of the enterprise is equal to the book value of net assets. In this case, the owner's market gain from investing in this enterprise is zero, so he wins equally by continuing operations in this enterprise or investing in bank deposits.

2. EVA >0 means an increase in the market value of the enterprise over the book value of net assets, which stimulates owners to further invest funds in the enterprise.

3. EVA <0 leads to a decrease in the market value of the enterprise. In this case, the owners lose the capital invested in the enterprise due to the loss of alternative profitability.

From the relationship between the market value of the enterprise and the EVA values, it follows that the enterprise must plan future EVA values ​​to guide the actions of the owners in investing their funds.

The expectation of future EVA values ​​has a significant impact on the growth of the company's share price. If expectations are inconsistent, the stock price will fluctuate, and in the short term it will not be possible to draw a clear relationship between EVA values ​​and the company's stock price. Therefore, the task of planning profit, and with it planning the structure and price of capital, is the primary task of enterprise management.

The EVA concept is often used by Western companies as a more advanced tool for measuring the performance of departments than net profit. This choice is explained by the fact that EVA evaluates not only the final result, but also the price at which it was obtained (i.e., how much capital was used and at what price).

3. Ways to increase EVA:

1. Increase in profit while using the same amount of capital;

2. Reducing the amount of capital used while maintaining profits at the same level;

3. Reducing the cost of raising capital.

Separately, we can highlight the reduction of taxes and other obligatory payments within the framework of tax planning, using various schemes allowed by the legislation of the Russian Federation.

The identified ways to increase EVA are implemented in specific activities carried out by enterprises. If the EVA indicator is chosen by an enterprise as a criterion for assessing the effectiveness of its activities, then the task is to increase the value of this criterion. Such an increase occurs both as part of the reorganization of the enterprise and as part of current management activities.

Activities aimed at increasing the efficiency of the enterprise

Performance evaluation criterion Goal of change Main types of organizational changes EVA growth 1. Increase in profit while using the same amount of capital a) Development of new types of products (works, services); b) Development of new markets (new market segments); c) Development of more profitable adjacent links in the production and technological chain. 2. Reducing the amount of capital used while maintaining profits at the same level Liquidation of unprofitable or insufficiently profitable areas of activity (including liquidation of an enterprise) 3. Reducing the cost of raising capital Changing the capital structure of an enterprise

In general, to summarize, we can outline the role played by the indicator of economic added value in assessing the efficiency of an enterprise:

· EVA acts as a tool that allows you to measure the actual profitability of an enterprise, as well as manage it from the position of its owners;

· EVA is also a tool to show plant managers. how they might affect profitability;

· EVA reflects an alternative approach to the concept of profitability (a transition from calculating return on invested capital (ROI), measured in percentage terms, to calculating economic value added (EVA), measured in monetary terms);

· EVA acts as a tool for motivating enterprise managers;

· EVA improves profitability primarily by improving the use of capital rather than by focusing its efforts on reducing the cost of capital.

Thus, it can be assumed that the use of the EVA indicator in management accounting will help improve the quality of assessing the performance of Russian enterprises.

The indicator of added economic profit can be increased by:

1. increasing the return on existing capital, which can be achieved by increasing prices or margins, increasing volumes or reducing costs;

2. growth in profitability, which can be achieved by investing capital in projects with growing profits and adequate expenditure of additional capital, while investments in working capital and production capacity may be required in order to increase sales volumes, promote new products or develop new markets;

3. optimization of investments, which can be achieved through rationalization, liquidation or reduction of investments in operations that cannot provide a return on the cost of capital;

4. optimizing the cost of capital, which can be achieved by reducing capital costs, while maintaining the financial flexibility necessary to implement the strategy of using debt, management risk and other financial instruments.

Thus, you can increase added economic profit in three ways - increase profit using the same amount of capital; reduce the amount of capital used while maintaining profits at the same level; and reduce capital raising costs.

The concept of managing the value of a company based on the economic value added method suggests using the economic value added (EVA) indicator as the main criterion for assessing the company’s activities.

The goal of value management is to maximize the value of the company through the continuous growth of economic value added (EVA). And the way to manage value is to manage the factors that influence the value of the company.

A company's performance is influenced by a huge number of different factors. They can be classified as external and internal environmental factors (that is, macro- and microeconomic factors). The former influence the company's performance from the outside, the latter from the inside.

Internal factors affecting the cost may include:

· Growth rate of sales of company products/services

· Growth rates of main items of the Balance Sheet and Profit and Loss Statement

Net profit growth rate

· Rate of return of the owner (shareholder, investor)

· Other factors

External factors affecting the cost may include:

· Level of investment, marketing, financial, production and organizational risks of the company

· Change in the cost of borrowed capital (interest rate on loans)

· Changes in tax rates

Economic value added is an important economic indicator that characterizes the efficiency of using the capital of an enterprise, adding to the market value of the enterprise. Economic value added is real economic income, calculated based on the difference between the profit earned and the profit required by the owner, determined using the cash method of accounting for income and expenses.

Economic value added, economic profit and other indicators of residual profit have clear advantages over accounting profit as a criterion for assessing performance.

EVA serves as a constant reminder to managers: invest if and only if the return on investment is sufficient to offset the cost of capital. Managers accustomed to focusing on accounting profits or profit growth find this “signal” relatively easy to pick up. The EVA criterion can be used to support incentive and reward systems suitable for all levels of the organization, right down to the very bottom. For senior management, such systems can replace careful monitoring. With EVA-based compensation systems, management will no longer have to tell lower-level managers not to waste capital and then check whether they follow this order. Using EVA involves delegating authority and responsibility.

EVA gives managers visibility into their cost of capital. A plant manager can improve EVA in two ways:

1) increasing profits;

2) reducing the capital involved.

Because of this, the manager has an incentive to get rid of underutilized assets or transfer them to other hands. Working capital may also decrease.

The indicator of economic added value has a number of disadvantages: this indicator does not reflect the forecast of future cash flows and, therefore, the present value. In contrast, EVA is determined only by the current year's profit. Accordingly, it encourages managers to pursue projects with quick returns and discourages projects that begin to pay off later. Similar problems arise when launching a new risky enterprise, when huge capital investments are required, and profits in the first years are low or even negative. Moreover, this does not equate to a negative net present value, since later profits and cash flow will increase significantly. But at the initial stage, economic value added will be negative, even if the project is predicted to have a high positive net present value by all parameters.

Among the disadvantages of the concept are the following:

· the EVA indicator does not take into account differences in the size of the companies under study;

· EVA calculation is based on accounting indicators;

· the EVA indicator does not reflect the causes of possible problems in the company's activities.

The ability to calculate EVA not only when evaluating an investment project, but also as an indicator of a company’s performance for any period is its significant advantage compared to traditional indicators such as income or profitability. This advantage is due to the fact that the EVA concept is based on an integrated approach to three main areas of management:

· preparation of capital budget;

· assessment of the performance of departments or the company as a whole;

· development of an optimal fair bonus system for management.

The advantages of applying the concept in the first two areas are associated with an adequate and non-labor-intensive determination of the degree to which a division, firm or individual project has achieved the goal of increasing market value.

Unfortunately, most companies use traditional performance indicators, namely: profit and marginal profit, sales volumes, income, etc., which can show a distorted picture of the company’s state from the perspective of its “health” over a long period.

Conclusion

Regardless of the size of the company, continued creation of value for investors is the main goal of all business organizations, therefore, an objective assessment of the effectiveness of investments is no less important.

Today, EVA is the most accurate way to assess a company's performance. It is even more accurate than traditional profit measures because it includes the present value of capital.

In most cases, the use of EVA is the first step towards the implementation of a system of continuous improvements and the subsequent use of modern management tools.

Bibliography

1. Osipov M.A. Using the concept of economic added value to improve efficiency and measure company performance // History of management thought and business. VI International Conference “Problems of Measurement in Organizational Management”. Moscow, June 23-25, 2007 / Ed. IN AND. Marsheva, I.P. Ponomareva. – M.: MAKS Press, 2007. – P. 98-103.

2. Osipov M.A. Modern mechanisms of enterprise management and measurement of its activities // Finance: Collection of articles. - M.: Sputnik + Company, 2008. – P. 95-126.

3. http://www.cfin.ru/management/controlling/evalution.shtmlEVAlution of the balanced scorecard Konstantin Redchenko, Ph.D., Associate Professor, Lviv Commercial Academy

4. http://1fin.ru/?id=185

L.I. Schneider Kuban State University

5. Damodaran A. Investment assessment. Tools and techniques for assessing any assets / A. Damodaran: Trans. from English M.: Alpina Business Books, 2005.

6. Teplova T.V. Investment levers for maximizing company value. Practice of Russian enterprises. M: Vershina, 2007.

7. Copeland T., Murrin J. Company value: assessment and management. M.: Olympus-business. 1999.

8. D. Young, S. O'Byrne. EVA and Value Based Management. A Practical Guide to Implementation - McGraw-Hill – 2000, Chapter 1, 2, 6, 9

EVA™ is a registered trademark of the consulting company SternStewart & Co. Next is EVA.

Stewart B. The Quest For Value: a Guide for Senior Managers. - New York: HarperCollins Publishers, 1991.

Http://www.cfin.ru/management/controlling/evalution.shtml

EVAlution of the balanced scorecard Konstantin Redchenko, Ph.D., Associate Professor, Lviv Commercial Academy

Http://www.finanalis.ru/litra/324/2293.html Economic added value Elena Larionova Consultant for financial analysis and planning at CG "Voronov and Maksimov", lecturer at the Faculty of Economics of St. Petersburg State University http :// www . vmgroup . ru /

Http://1fin.ru/?id=185L.I. Schneider Kuban State University

One of the most well-known approaches to business valuation is the method based on the assessment of economic added value ( Economical Value Added, EVA), which shows the value added during the period, taking into account opportunity costs, and the amount of investment aimed at expansion that will add value in the future. Let's look at an example of a business valuation methodology based on EVA and the procedure for analyzing the obtained indicator values. In addition, the article presents formulas for determining the indicator EVA and a complete interpretation of their components is given.

Economic Value Added is a tool that shows how to measure, manage and influence profitability.

Before we begin to describe business valuation based on economic value added ( EVA), it should be noted that large Russian organizations are moving to a business management concept based on a cost approach ( Value Based Management, V.B.M.). system V.B.M. at the upper level of cost factors can be represented as follows (Fig. 1).

Rice. 1. System V.B.M. at the upper level of cost factors

Concept EVA often used as a more advanced tool for measuring the efficiency of departments, as opposed to net profit, due to the fact that EVA evaluates not only the final result, but also the price at which it was obtained, that is, how much capital was used and at what price. If the indicator EVA chosen by the organization as a criterion for assessing the effectiveness of its activities, then the task is to increase the value of this indicator.

Generally accepted indicators do not allow a complete assessment of the organization’s performance and accurately determine how much the owner’s capital costs and what income it brings.

The market value of an organization may exceed or be less than the book value of net assets, depending on the future profits of the organization and is determined by the formula:

Q= A + EVA,

Where Q— market value of the organization;

A - net assets (at book value);

EVA— economically added value of future periods, reduced to the present time.

Note that:

• If EVA= 0, the market value of the organization is equal to the book value of net assets. In this case, the market gain of the owner when investing in this organization is equal to 0;
• EVA> 0 means an increase in the market value of the organization over the book value of net assets, which stimulates owners to further invest funds in the organization;
• EVA < 0 говорит об уменьшении рыночной стоимости организации. В этом случае собственники теряют вложенный в организацию капитал за счет потери альтернативной доходности.

The main economic meaning of the indicator EVA is that the organization's capital must work with such efficiency as to provide the rate of return required by the investor, shareholder or other owner.

From the formula for economic added value, one can derive the relative indicator “Return on Invested Capital” ( Return on Capital Employed, ROCE). The economic meaning of this indicator is that economic added value ( EVA) arises if, over a given period of time, it was possible to create a return on invested capital ( ROCE) is higher than the investor's rate of return ( WACC). Investors (owners, shareholders) will not consider themselves satisfied if the return on their capital created by the organization has not reached the barrier rate of return they set. This principle of formation of the value of an organization is expressed in the following representation of the indicator of economic added value:

EVA = Spread × C.E. = (ROCE - WACC) × C.E.,

Where Spread— yield spread (the difference between the return on invested capital and the weighted average cost of capital). Represents economic value added in relative terms (in%);

C.E.— invested capital;

ROCE— return on invested capital. Defined as follows:

ROCE = NOPAT / C.E..

If Spread positive, this means that the company's profitability exceeds the profitability required by investors.

Next, let’s use a conditional example to evaluate a business based on economic added value. The source data is presented in the Balance Sheet and the Statement of Financial Results. The planning horizon is 3 years, while the growth rate of the main items of the Balance Sheet and the Financial Results Statement will not change and will amount to 23% per year.

For value management purposes, the most informative indicator is the market value of net assets, which allows you to determine the price at which a business can be sold. For our example, the calculation of net assets is given in table. 4.

Table 4. Calculation of the organization’s net assets in the balance sheet valuation, thousand rubles.
	Indicators	At the beginning of the period	At the end of the period	Change (+/-)
	Intangible assets
	Fixed assets
	Construction in progress
	Profitable investments in material assets
	Long-term financial solutions
	Others fixed assets
	VAT on purchased assets
	Accounts receivable
	Short-term financial investments
	Cash
	Other current assets
	Total assets
	Targeted funding and revenues
	Borrowed funds
	Accounts payable
	Debt to founders for payment of dividends
	Reserves for future expenses
	Other liabilities
	Total liabilities excluded from the value of assets
	Net asset value

As we can see, the value of the net assets of the organization under study increased over the period by 21,298 thousand rubles, or 19.45%.

The dynamics of changes in economic added value can be traced using a diagram (Fig. 2).

Rice. 2. Dynamics of economic added value

Thus, in our example EVA> 0, which means that the value of the organization is growing and the available capital is being used effectively. In addition, the organization's capital ensured the rate of return on invested capital established by the owner of the organization and brought additional income (added value). The value of ROCE > WACC indicates that the organization managed to earn added value during the analyzed period. The profitability of the organization exceeds the profitability required by the investor (there is a positive yield spread).

K. V. Zhelnova,
Candidate of Economic Sciences

The material is published partially. You can read it in full in the magazine

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