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 minimise taxes
B) Improve information reported to the ASIC
C) Encourage managers to file tax reports
D) Remove bias from the EVA calculation

Question

Quizplus · Accepted Answer

After-tax profit is used to remove the bias from the EVA calculation. This is because taxes can vary significantly from company to company, and using operating profit would not take this into account. By using after-tax profit, the EVA calculation is more accurate and can be used to compare companies on a more level playing field.

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