Contents What is EVA? The calculation of EVA The EVA management system Contents What is EVA? The calculation of EVA The EVA management system Optimizing the EVA Measure Materiality Difference in EVA with or without adjustment – Is it material? Set a rule of thumb and use common sense Motivation Adjustment must motivate managers to do the right thing Start with dysfunctional behaviors in standard operating procedures Data Availability Cost of collecting information must be reasonable Simplicity EVA is for operating people – keep it simple A fully adjusted EVA is too complicated to use and communicate Accounting conservatism treats many investments as current expenses  (R&D, significant Marketing/Training - only those specifically relating to a “strategic”purpose) EVA views them as investments in the future   Accounting misstates cash flow(Reserves) EVA seeks to emphasize actual cash events