PACIFIC INSTITUTE OF MANAGEMENT

PREFACE

Practical knowledge has inestimable value for a student because theoretical knowledge is incomplete if it is not correlated with the practical knowledge. The work and experience gained during training period has increased my knowledge many folds.
My report is the outcome of study for the internal project during 2007 session and has been produced for the fulfillment of the degree of master in business administration from PACIFIC INSTITUTE OF MANAGEMENT affiliated to RAJASTHAN TECHNICAL UNIVERSITY, KOTA.
The topic of my project is a study of the new management mantra ECONOMIC VALUE ADDED (EVA). EVA is basically the difference between the operating profit and the cost of capital employed.
Any year that a company is in business and generates more operating profit than its capital charge, it is related economic value.The idea behind EVA is that share holders must earn a return that compensates the risk taken. In other words equity capital has to earn at least some return as similar risky investments at equity markets. If that is not the case then there is no real profit made and actually the company operates at a viewpoint of share holders on the other hand is zero. This should be treated as a sufficient achievement because the share holders have earned returns that compensate the risk.