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Identifying Value Creators

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Financial Management CASE STUDY NO.2
IDENTIFYING VALUE CREATORS 1. Defining case issue
Based on the issue Linda faced, she needs to assess which company create or destroyed value for investors, it should be included to the value analysis, which means using value ratios to show the “embedded value” in stocks in order to screen and assess the invest value before making investment.
So in our case report, we will solve three case issues: (1) To make value analysis of the pairs of Asian and American firms in different industries; (2) To understand how to use EVA, such as the differences between EVA and other financial ratios, advantages and disadvantages. (3) To make value comparison analysis among different industries and market conditions, try to find the reason behind the result. 2. Evaluation of value analysis tools---EVA
Economic value added is a quiet new performance measure, which was invented by G. Bennet Stewart and Joel Stern. Simplified, EVA is a measurement tool that determines if a business is earning more than its true cost of capital. This measure is used in managerial purposes, because it gives managers a clearer idea of whether they are creating or destroying shareholder wealth. There are many value drivers that need to be managed, but there can be only one measure that demonstrates success. A single measure is needed as the ultimate reference of performance to help managers balance conflicting objectives. When we are using a NPV value we need to see at result of IRR (Internal Return Rate) for which we use the same period as we used for NPV. It means that we can’t see clear current situation and actual performance, we should have period of time to see a business performance to consider a capital investment. Measures as earnings and EPS (Earnings per share) we can identify more for acquisition purposes. However the best advantage

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