Economic Value Added and Small Businesses
Economic Value Added (EVA), a tool for creating wealth, is a leading idea in corporate finance today. Highly regarded companies like Coca-Cola and CSX have seen their market value soar since adopting EVA. The concept is straightforward; value is created when earnings exceed the cost of invested capital. Thus, EVA is rapidly gaining acceptance among large, publicly-traded corporations. However, EVA can be applied effectively to create value in small, privately-held firms, too. This article illustrates EVA's application in small, privately-held firms, examines EVA "s strengths and weaknesses, discusses ways to overcome those weaknesses, and describes specific operating, investing and financing actions small business managers can take to create wealth.
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