Best-Practice EVA

"The Return to Value "tells the new EVA story from the ground up. Stewart covers EVA essentials--the classic economic profit version of EVA--in the first three chapters of the book.--showing readers how how simple and intuitive EVA really is, how it is defined and why it is better than all other measures of corporate profit and cash flow. You discover how it naturally guides managers into making all the right decisions--the ones that will truly maximize value. You even see how to use it in profit-sharing bonus plans that create the powerful incentives of an owner. Later, Stewart introduces new ratios such as EVA Momentum, calculated by taking the change in EVA versus the prior period, and dividing by the revenues in the prior period. It measures the growth rate in EVA, scaled to the sales size of the business. It is the only corporate performance ratio where bigger always is better, because it gets bigger when EVA does, which means it should be every company's most important financial goal, the one ratio metric that everyone aims to maximize as the key measure of corporate success. Stewart then walks through the nuts and bolts of Best-Practice EVA, kicking off with an in-depth look at EVA Margin, or EVA as a percent of sales. It's a key productivity metric, and Stewart's candidate to replace ROI. The last link in the Best-Practice program is PRVit--the EVA market score report. Stewart shows how to read and interpret the report, how the score is determined, and why investors are turning to it to screen and rate stocks. He also shows why it is finding a home with CFOs and IR directors who want insights into how the market is pricing their stock. The book concludes with battle-tested tips from the firing line, practical suggestions for how you can test drive and adopt Best-Practice EVA at your company.

Table of Contents

Preface

1. EVA 101 - the bare essentials, including the EVA bonus plan, in one chapter

2. EVA and Value - what's the connection, what are the insights?

3. Accounting For Value - how EVA fixes accounting distortions

4. What's Wrong with RONA? - ROI is popular but flawed; here's how

5. The New EVA Ratio Metrics - a major advance making EVA easier and better

6. EVA Margin - an in-depth look at the Momentum up-shifter

7. Setting EVA Targets - for business plans and incentive plans

8. Put Momentum into Planning - maximize value by maximizing EVA

9. Dividing Multiples into Good and Bad - use EVA-based valuation multiples

10. Put EVA into Decisions and Acquisitions - use EVA to improve NPV

11. EVA and the Buy Side - how EVA is helping investors make better buy/sell decisions

12. Become a Best-Practice EVA Company - a guide to best practices and getting there

The EVA Software Toolkit

Glossary of Key EVA Terms

Corrective Accounting AdjustmentsAccounting for Corporate Charges in Detail