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.

Question

Quizplus · Accepted Answer

EVA is calculated by subtracting a firm's cost of capital from its operating income. Therefore, increasing EVA requires generating the same level of operating income while using less investor-supplied capital.

Which of the Following Statements Is CORRECT