EVALUATION OF FINANCIAL PERFORMANCE USING THE EVA (ECONOMIC VALUE ADDED) METHOD IN PUBLIC COMPANIES IN INDONESIA
Keywords:
Economic Value Added (EVA), financial performance, public companies, cost of capital, economic value added.Abstract
Financial performance assessment is an important aspect in determining the financial health and sustainability of a company. Economic Value Added (EVA) is a method used to evaluate the creation of true economic value for shareholders by considering the capital costs incurred by the company. This research aims to analyze the effectiveness of the EVA method in assessing the financial performance of public companies in Indonesia through a literature review from various previous studies. The research method used is a qualitative approach with a literature review method, which involves analysis of scientific journals, books and previous research discussing the implementation of EVA. The study results show that EVA provides a more comprehensive picture compared to conventional financial indicators such as ROA and ROE, because it is able to show whether the profits obtained really create added value after taking into account the cost of capital. Even though EVA has various advantages, its implementation still faces challenges, such as the complexity of calculations and limited access to accurate capital cost data. This research concludes that EVA is an effective financial performance evaluation method in providing more transparent information for management and investors. Wider use of EVA in public companies in Indonesia can help improve financial efficiency, optimize resource allocation, and provide better insight for investors in making investment decisions. Therefore, a deeper understanding and a supporting accounting system is needed so that this method can be applied optimally in various industrial sectors.
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