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15) A factory manager can improve EVA by A) increasing earnings and increasing capital employed. B) increasing capital employed and reducing earnings. C) reducing earnings and reducing capital employed.
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21 votes
21 votes
15) A factory manager can improve EVA by A) increasing earnings and increasing capital employed. B) increasing capital employed and reducing earnings. C) reducing earnings and reducing capital employed. D) increasing earnings and reducing capital employed.

User Sanket Prabhu
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1 Answer

21 votes
21 votes

Answer: D) increasing earnings and reducing capital employed.

Step-by-step explanation:

Economic Value Added (EVA) shows how much residual income that a company has after it subtracts the cost of the capital invested from the operating profit that the company got.

If a manager wants to increase EVA therefore, they need to reduce the capital used so that the cost of capital will be less. This should be done while earnings are increased for an even higher increase in EVA.

User Thecrentist
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