Economic value added uses "adjusted after-tax operating profit" as one of its inputs. One purpose of using after-tax profit, rather than operating profit, is to B
A) Encourage managers to file tax reports
B) Encourage managers to minimise taxes
C) Improve information reported to the ASIC
D) Remove bias from the EVA calculation

Question

Quizplus · Accepted Answer

By using after-tax profit, the EVA calculation encourages managers to minimize taxes, which can lead to more efficient use of resources and higher profits. This can also help to remove bias from the EVA calculation, as it ensures that managers are focusing on maximizing value for shareholders rather than simply maximizing reported operating profits.

Economic Value Added Uses "Adjusted After-Tax Operating Profit" as One