Which of the following statements is CORRECT?
A) One way to increase EVA is to achieve the same level of operating income but with more investor-supplied capital.
B) If a firm reports positive net income, its EVA must also be positive.
C) One drawback of EVA as a performance measure is that it mistakenly assumes that equity capital is free.
D) One way to increase EVA is to generate the same level of operating income but with less investor-supplied capital.
E) Actions that increase reported net income will always increase net cash flow from operations.

Question

Quizplus · Accepted Answer

EVA (Economic Value Added) is a measure of financial performance that takes into account the cost of capital. It is calculated as the difference between net operating profit after tax (NOPAT) and the cost of capital. One way to increase EVA is to generate the same level of operating income but with less investor-supplied capital. This would reduce the cost of capital, which would increase EVA.

Which of the Following Statements Is CORRECT