Which of the following is a way in which managers can improve their company's or business unit's EVA?
A) earning more profit without using more capital
B) using more capital
C) investing capital in multiple low-return projects
D) extending their line of credit
E) divest a unit

Question

Quizplus · Accepted Answer

EVA (economic value added) is a performance metric that measures the value a company creates above the cost of capital used to generate that value. Therefore, managers can improve their company's EVA by earning more profit without using more capital, which increases the economic value that a company creates. Options B, C, and D are counterproductive to improving EVA as using more capital, investing capital in multiple low-return projects, and extending the line of credit can increase the cost of capital and reduce the economic value added. Option E may improve EVA if the unit being divested is not contributing to positive EVA but not necessarily the best choice as it depends on the specifics of the unit being divested.

Which of the Following Is a Way in Which Managers