Is EVA an improvement over ROH, ROE, or EPS? Explain and give examples to support your position.
EVA, ROH, ROE, and EPS are acronyms for metrics that are utilized by organizations make decisions in order to allocate resources to maximize profitability. ECA or Economic Value Added has been recognized as more efficient compared to other metrics. One of the advantage of EVA is that the employees could start to think at the same level as an owner of an investment would do.
EVA is more practical than the other metrics. It is an income statement based which can be explained easily to shareholders who do not have a financial background. Shareholders/investors may not necessarily be familiar with technical financial terms and would simply want to know the status of the profits they are getting for their shares, for example in theirs shares in the stock market.
EVA can also provide a better picture of the day to day actions like decrease in cost etc. compared to the other metrics.