Interaction of Earning Management and Economic Value Added

Abstract :

Every business can evaluate its performance through many indicators, each of which has its advantages, but also disadvantages. Traditional financial analysis uses information from the past. Because of it they are not often sufficient to business performance measurement. Business that wants to maintain and improve its market position, it should use new methods of performance evaluation. One of modern tools of business performance evaluation, which has been in recent years paying close attention, is the economic value added – EVA.? The reported profits of each business have a very strong impact on a variety of business activities and decisions that the company management has to do. The aim of earnings management is to report profit at the amount required corporate management. Earnings management uses some techniques of creative accounting. The main aim of the article is to examine theoretical background of EVA and of some motives of earnings management.? Based on this information there could be find some relationship between earnings management and the economic value added indicator. There is also mentioned the effect of earnings management and EVA on the company and on individual investors of the company is evaluated. The contribution of the article is to summarize of knowledge about economic value added and earnings management, their assessment and determination of their impact on the company.