Economic Value Added Measurement and Management in Companies

Changes in corporate governance bring value creation for shareholders to focus of modern companies. This process expanded from USA to Europe and it is certain that it will have influence on Croatian companies. Economic value added and market value added concept evolved on critics of accounting measures of company performances. To get economic value added that represent real increase of value for owners, numerous adjustments of accounting data are necessary. These adjustments give us net operating profit after taxes and invested capital. Multiplying capital with average cost of capital equals cost of capital expressed in money units. If net operating profit after taxes is greater than cost of capital, economic value is created for the owners. Calculations of economic value added were made for Croatian company that can be considered successful according to accounting performance criteria. According to economic value added criterion this company destroys value for its owners. Economic value added measurement is only first step in changing corporate governance for value creation. Now the companies need value added management that is condition for value creation for owners, customers and employees.