By adjusting for a division's earnings and accounting for the cost of investing in a division, economic value added is a much more accurate estimate of a division's economic performance than are traditional accounting measures of performance.

Question

Quizplus · Accepted Answer

Economic value added (EVA) takes into account the cost of capital invested in a division and adjusts for its earnings. This provides a more accurate picture of the division's economic performance than traditional accounting measures such as profit or return on investment. Therefore, the statement is true.

By Adjusting for a Division's Earnings and Accounting for the Cost