The following are advantages of using EVA as a performance measure except
A)EVA can substitute for explicit monitoring by top management.
B)EVA makes the cost of capital visible to operating management, thereby reducing capital employed.
C)EVA does not measure present values.
D)EVA highlights business units that are underperforming their peers.

Question

Quizplus · Accepted Answer

This statement is incorrect. EVA does measure present values by deducting the cost of capital from the net operating profit after tax (NOPAT). This helps to determine the overall economic value added by a business or unit. The other three statements are advantages of EVA.

The Following Are Advantages of Using EVA as a Performance