“PERFORMANCE TREND” AND “PERFORMANCE CURRENT” RATINGS BY ECONOMIC VALUE ADDED (EVA)

Abstract

The Economic Value Added (EVA) is an index of “durable development.” It was proposed by the Stern-Stewart Office and represents the true economic profit of companies. A company reports economic profit only if thereported accounting profit is higher than the opportunity cost of equity. The authors of the EVA model (Stern-Stewart) have also proposed the ways of restating the financial statements to get a “fair image” of the results, thuseliminating the “accounting distortions.”Based on the performance indexes calculated based on EVA and second-generation indexes relating toEVA, we calculated two types of rating: Rating Performance Current and Rating Performance Trend. The rating iscalculated by means of the percentiles technique and the results are split into 22 rating classes.The used database is Russell 3000.

Keywords

• Economic Value Added (EVA)
• rating
• EVA Margin
• EVA Momentum
• Profitable Growth