Other Flashcards
1
Q
Economic Profit or Economic Value Added (EVA)
A
generated when returns exceed the cost of capital; when return on equity (ROE) exceeds the equity cost of capital, EVA is generated i.e. EVA = ROE - Equity Cost of Capital. For entire company, EVA = ROIC - WACC. When economic value is added, residual income is generated: Residual income = NOPAT - Assets * WACC.
2
Q
When a company is experiencing an increase in inventory turnover ratio, this could be indicative of
A
more efficient purchasing and marketing
