The importance of ROE for calculating EVA Equity: the case of Motor Jikov Strojírenská, a.s.

Abstract

A remarkable success depends on a variety of factors, one of which is the ability to motivate the employees, increasing motivation of managers, measuring business processes and measuring and observing values of the company. The tangible results are also shown by the indicator of return on equity (ROE). The article aims at reflecting the importance of ROE for the EVA Equity (economic value added for shareholders) calculation of Motor Jikov Strojírenská, a.s. The data come from Albertina database. These are details of financial statements from 2000-2015. As a matter of fact, weighted average costs of capital, alternative cost value of equity capital and EVA Equity are calculated. Software Statistica and its sophisticated tool data mining - automated neural networks was used for finding a correlation between EVA Equity indicator and ROE. In addition, 10,000 neural networks were generated, five of which with the best results have been stored. The results show that EVA Equity is not dependent on the ROE rate.

Keywords

• return on equity (ROE)
• economic value added for shareholders (EVA Equity)
• correlation
• company management
• artificial neural networks