Do companies that generate profits make economic value added?

• Autorzy: Robert Zenzerović
• Języki publikacji: EN

Abstrakty

EN

This paper focuses on determining the differences between economic value added (EVA), net operating profit after tax (NOPAT), earnings before interest and taxes (EBITDA), and net income or loss for non-financial business entities operating in the Republic of Croatia in the period 2002-2021. The main objective of this paper is to determine whether non-financial activities create economic value added, and rank them according to selected indicators based on EVA. Research results indicate that there were only 27 out of 309 cases where EVA was positive, indicating that only the information and communication sector generated, on average, positive EVA during this twenty-year period. Positive EVA was generated in certain years in companies conducting human health and social work activities, education, mining, and quarrying, as well as in wholesale and retail trade activities, but the average EVA for this twenty-year period in these sectors was negative. At the same time, net income was achieved in 246 cases, and NOPAT in 285. Meanwhile, EBITDA was positive in all cases, demonstrating an obvious discrepancy between EVA and other financial performance measures. Correlation analysis results indicate that there is a statistically significant moderate correlation between EVA and net income/loss, although the correlation is generally stronger between EVA and EBITDA-based indicators. According to research results, the answer to the question in the title of this paper is negative, emphasizing the possibilities of intensive introduction of EVA as a financial performance indicator(original abstract)

Słowa kluczowe

EN

Value added; Economic Value Added (EVA); Business entity; Capital

PL

Wartość dodana; Ekonomiczna wartość dodana; Podmioty gospodarcze; Kapitał

• Czasopismo: e-mentor
• Rocznik: 2023
• Numer: nr 2
• Strony: 83--88

Twórcy

autor

Robert Zenzerović

• Juraj Dobrila University of Pula,

Bibliografia

• Cinotti, K. (2022). Odrednice zahtijevane razine ekonomske dodane vrijednosti uz adekvatnu financijsku stabilnost poduzeća [Determinants of the required level of economic value added respecting financial stability of a company] [doctoral dissertation]. Sveučilište u Zagrebu. https://repozitorij.efzg.unizg.hr/islandora/object/efzg:10352
• Cinotti, K., Marić, M. (2021). Čimbenici rasta ekonomske dodane vrijednosti: konfiguracijski pristup [Growth factors of economic value added: Configurational approach]. "Zbornik Ekonomskog fakulteta u Zagrebu", 19(2), 71-88. https://doi.org/10.22598/zefzg.2021.2.71
• Damodaran, A. (2012). Investment valuation: Tools and techniques for determining the value of any asset (3rd ed.). Wiley.
• Damodaran. (2023a, January 8). Cost of equity and capital. https://pages.stern.nyu.edu/~adamodar/New_Home_Page/datafile/wacc.html
• Damodaran, A. (2023b, January 5). Country default spreads and risk premium. https://pages.stern.nyu.edu/~adamodar/New_Home_Page/datafile/ctryprem.html
• Dobrowolski, Z., Drozdowski, G., Panait, M., Apostu, S. A. (2022). The weighted average cost of capital and its universality in crisis times: Evidence from the energy sector. "Energies", 15(18), 6655. https://doi.org/10.3390/en15186655
• Grant, J. I. (2003). Foundations of economic value added. Wiley.
• Horvat, J., Mijoč, J. (2019). Istraživački SpaSS. Josip Juraj Strossmayer University of Osijek, Faculty of Economics, Ljevak, Zagreb, p. 439.
• Horvat, J., Mijoč, J. (2019). Istraživački SPaSS [Research SPaSS]. Naklada Ljevak.
• Sabol, A., Sverer, F. (2017). A review of the Economic Value Added literature and application". UTMS Journal of Economics", 8(1), 19-27. https://www.utmsjoe.mk/files/Vol. 8 No. 1/UTMSJOE-2017-0801-03-Sabol-Sverer.pdf
• Shen, Y., Zou, L., Chen, D. (2015). Does EVA performance evaluation improve the value of cash holdings? Evidence from China. "China Journal of Accounting Research", 8(3), 213-241. https://doi.org/10.1016/j.cjar.2015.01.004
• Stewart, G. B. (1991). The quest for value: a guide for senior managers. HarperBusiness.
• Tripathi, P. M., Chotia, V., Solanki, U., Meena, R., Khandelwal, V. (2023). Economic value added research: Mapping thematic structure and research trends." Risks", 11(1), 9. https://doi.org/10.3390/risks11010009
• Wallace, J. S. (1997). Adopting residual income-based compensation plans: do you get what you pay for? "Journal of Accounting and Economics", 24(3), 275-300. https://doi.org/10.1016/s0165-4101(98)00009-3
• Zenzerović, R., Černe, K., Galant, A. (2023). Comparison of Economic Value Added and Modified Value Added Intellectual Coefficient as a Measure of Intelectual Capital Valuation. In The 10th International Scientific Conference "Finance, Economics and Tourism - FET 2022. Conference Proceedings (pp. 465-479). Croatian Academy of Sciences and Arts and Juraj Dobrila University of Pula. https://fet.unipu.hr/images/50033862/FETconf Conference Proceedings 2022 online.pdf

Identyfikatory

DOI

https://doi.org/10.15219/em99.1611