A financial performance measure based on the difference between a firm's actual earnings and required earnings is sometimes called:
A)clean surplus relationship.
B)economic value added.
C)accounting earnings identity.
D)payout-retention identity.
E)dividend valuation equation.

Question

Quizplus · Accepted Answer

The financial performance measure based on the difference between a firm's actual earnings and required earnings is called economic value added (EVA). It is used to measure how much value a company has created during a specific period of time. It is calculated as Net Operating Profit After Tax (NOPAT) - (Cost of Capital x Total Capital). It is also sometimes known as "residual income".

A Financial Performance Measure Based on the Difference Between a Firm's