The only measure of firm performance that accounts for cost of capital is:
A) ROC.
B) ROA.
C) ROE.
D)EVA.

Question

Quizplus · Accepted Answer

EVA stands for Economic Value Added, and it is the only performance measure that considers the cost of capital. EVA takes into account the company's net operating profit after tax (NOPAT) and subtracts the cost of capital - the cost of debt and equity - to determine whether the company has generated value or not. This makes EVA a more accurate measure of performance compared to other measures such as ROA or ROE, which do not consider the cost of capital. Therefore, EVA is the best choice.

The Only Measure of Firm Performance That Accounts for Cost