Book

Description

A company can report a profit and still fall short of creating economic value. How can managers recognise that shortfall, understand its causes and make better decisions? Economic Value Added and Corporate Financial Strategy explores these questions through the unfolding decisions of Nirmal Components, a fictional Indian manufacturer. From the boardroom to the factory floor, readers follow the connections between operating profit, invested capital, borrowing, investment and the returns expected by investors. The book explains how to calculate and interpret Economic Value Added, assess financing choices, improve working capital and evaluate investments whose benefits take time to appear. A disruption and recovery narrative shows why renewed sales do not necessarily mean restored value creation. Later chapters examine research evidence, managerial incentives, disclosure, governance and financial resilience. Written in accessible English, the discussion combines a continuous company narrative with worked calculations and critical engagement with published scholarship. It explains both the usefulness of EVA and the judgement needed when applying it alongside cash-flow, risk and operational measures. For students, teachers, researchers and finance practitioners, this book offers a practical way to connect financial measurement with everyday business decisions and responsible capital stewardship.