1、本科毕业论文（设计） 外 文 翻 译 原文 ： Economic Value Added - A General Perspective Performance Measurement Investors measure overall performance of a firm as a whole to decide whether to invest in the firm or to continue with the firm or to exit from it. In order to achieve goal congruence, managers compensation
2、is often linked with the performance of the responsibility centers and also with firm-performance. Therefore selection of the right measure is critical to the success of a firm. To measure performance of a firm we need a simple method for correctly measuring value created/ enhanced by it in a given
3、time frame. All the current metrics trade off between the precision in measuring the value and its cost of measurement. In other words, each method takes into consideration the degree of complexities in quantifying the underlying measure. The more complex is the process, the more is the level of sub
4、jectivity and cost in measuring the performance of the firm. There is a continuous endeavor to develop a single measure that captures the overall performance, yet it is easy to calculate. Each metric of performance claims its superiority over others. Performance of a firm is usually measured with re
5、ference to its past record and the performance of other firms with comparable risk profile. The various performance metrics currently in use are based on the returns on investment generated by the business entity . Therefore to reach a meaningful conclusion, returns generated by the firm in a partic
6、ular year should be compared with returns generated by assets with similar risk profile (cross sectional analysis) Similarly return on investment for the current period should be compared with returns generated in past (time series analysis). A firm creates value only if it is able to generate retur
7、n higher than its cost of capital. Cost of capital is the weighted average cost of equity and debt (WACC). The performance of a firm gets reflected on its valuation by the capital market. Market valuation reflects investors perception about the current performance of the firm and also their expectat
8、ion on its future performance. They build their expectations on the estimated growth of the business in terms of return on capital. This results in an incongruence between current performance and the value of the firm. Even if the current performance is better in relative terms, poor growth prospect
9、s adversely affects the value of the firm. Therefore any metric of performance, to be effective, should be able to not only capture the current performance but also should be able to incorporate the direction and magnitude of future growth. Therefore the robustness of a measure is borne out by the d
10、egree of correlation the particular metric has with respect to the market valuation. Perfect correlation is impossible because as shown by empirical research fundamentals of a company cannot fully explain its market capitalization, other factors such as speculative activities, market sentiments and
11、macro-economic factors influence movement in share prices. However the superiority of a performance metric over others lies in providing better information to investors. Metrics of performance have a very important and critical role not only in evaluating the current performance of a firm but also i
12、n achieving high performance and growth in the future. The metrics of performance have a variety of users, which include all the stakeholders whose well being depends on the continued well being of the firm. Principal stakeholders are the equity holders, debt holders, management, and suppliers of ma
13、terial and services, employees and the end-users of the products and services. Value creation and maximization depends on the alignment of the various conflicting interests of these stakeholders towards a common goal. This means maximization of the firm value without jeopardizing the interests of an
14、y of the stakeholders. Any metric, which measures the firm value without being biased towards any of the stakeholders or particular class of participants, can be hailed as the true metric of performance. However it is difficult, if not impossible, to develop such a metric. Most of the conventional p
15、erformance measures directly relate to the current net income of a business entity with equity, total assets, net sales or similar surrogates of inputs or outputs. Examples of such measures are return on equity (ROE), return on assets (ROA) and operating profit margin. Each of these indices measure
16、a different aspect of performance, ROE measures the performance from the perspective of the equity holders, ROA measures the asset productivity and operating profit margin reflects the margin realized by the firm at the market place. The net income figure in itself is dependent on the operational ef
17、ficiency, financial leverage and the ability of the entity to formulate right strategy to earn adequate margin in the market place. It is important to note that none of these measures truly reflect the complete picture by themselves but have to be seen in conjunction with other metrics. These measur
18、es are also plagued by the firm level inconsistencies in the accounting figures as well as the inconsistencies in the valuation methods used by accountants in measuring assets, liabilities and income of the firm. Accounting valuation methods are in variance with the methods that are being used to va
19、lue individual projects and firms. The value of an asset or a firm, which is a collection of assets, is computed by discounting future stream of cash flows. The net present value (NPV) is the surplus that the investment is expected to generate over the cost of capital. Measures of periodical perform
20、ance of a firm, which is the collection of assets in place, should follow the same underlying principles. Economic value added (EVA)is a measure that captures the valuation principles. Eva as a performance measure Proponents of EVA argue that EVA is a superior measure as compared to other performance measures on four counts: It is nearer to the real cash flows of the business entity； It is easy to calculate and understand； It has a higher correlation to the market value of the firm and； Its application to employee compensation leads to the alignment of managerial
