What is an advantage of using economic value added (EVA) in performance measurement over return on investment (ROI)?
A)It is easier to calculate.
B)It encourages investments that are profitable to the company.
C)both a and b
D)none of the above

Question

Quizplus · Accepted Answer

EVA takes into account the cost of capital, which encourages investments that generate a return higher than the cost of funding them. ROI only measures the return on the investment, without taking into account the cost of capital. EVA provides a more accurate measure of profitability and encourages better investment decisions.

What Is an Advantage of Using Economic Value Added (EVA)