Final Exam & Answer_Management Accounting and Control_Aalto_MBA
- 최초 등록일
- 2023.02.04
- 최종 저작일
- 2022.06
- 10페이지/ MS 워드
- 가격 2,000원
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핀란드 Aalto 대학교 MBA 과정에서 과제로 작성한 리포트 입니다.
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본문내용
a) What is the difference between ROCE (Return on Capital Employed) and EVA? Please explain shortly. (Note: You do not need to write down the formulas)
In large, ROCE is a proportion which divides EBIT by capital and EVA is an amount which minus capital charge from EBIT. So common driver for both is EBIT. And also both they are the financial performance measurement that reflects BS, PL and cash flow of the company. While there is some correlation, there are also differences between them.
EAV is a measure based on residual income technique. It represents that real value is created when additional returns are generated for shareholders above their required rate of return. So only when ROI(or ROCE) exceeds WACC(or required rate of return), it could create economic values. Namely, profitability of the investment should be higher than the cost of the invested capital which a company incur to the lenders and shareholders. So ROCE is one of the main drivers of EVA but ROCE doesn’t reflect the cost of the capital.
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