What are the advantages of "Economic Value Added Analysis"?

Advantages of Economic Value Added Analysis In various cases, company pay bonus to the employees on the basis of EVA generated. Since a higher EVA implies higher bonus to the employees, it encourages the employees to work hard for generating higher revenue. Using EVA, company can evaluate the projects independently and take decision whether to execute the project or not. It helps the company in monitoring the problem areas and accordingly taking corrective actions to resolve those problems. Unlike accounting profit, such as EBIT, Net Income and EPS, EVA is based on the idea that a business must cover both the operating costs as well as the capital costs and hence it presents a better and true picture of the company to the owners, creditors, employees, shareholders and all other interested parties. It also helps the owners of the company to identify the best person to run the company effectively and efficiently.