the application of economic value added in financial decision making

there are several methods for measuring the performance and value of a company. these are, earnings per share, earnings growth rate, dividend per share, rate of return on equity and free cash flow. the purpose of this article is to show that all these criteria have some deficiencies and will introduce a new criterion called economic value added (eva). eva is computed by subtracting capital charges from net operating income after taxes. in this article several examples were presented to show that eva. correctly mea sure s company's performance and hence is superior to all other criteria.