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EVA - Coggle Diagram
EVA
NOTE EXPLANATIONS
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(3) income from non op investments, reverse them
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(2) convert acc profit into cash op profits
-Provisions for BD
-Inventory provisions
-Sundry accruals & provisions
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(7) R&D + Operating lease to be capitalised
R&D amort < less than R&D expense = low effect on EBIAT
Operating lease is like a means of financing like finance leases
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BENEFITS
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use in business operating performance, investment
center lvl & company lvl
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INTRO
profit, ROI, RI encourage maximising acc profit
but it isn't always in SHs' best interests
you want to measure manager performance
based on CFs, not acc earnings
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MEASURING
EBIAT/NOPAT
Net profit before tax (1) xxx
- Adjust for:
Accrual adjs (2) xxx
Non-op items (3) xxx
- Add:
GW amortised (4) xxx
R&D expenditure (7) xxx
- Less:
Amort of R&D and Leases (7) (xxx)
Tax on op profits (adjusted) (xxx)
Capital Invested
Tot (A)s (SFP) xxx
- Less:
Non-int bearing (L)s (6) (xxx)
Non op (A)s (3) (xxx)
- Add:
Cum GW amortised (4) xxx
Accrual adjs (2) xxx
Net book val
*R&D (7) xxx
*Lease exp xxx
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