Application Study On EVA Evaluation Of Chinese Enterprises

EVA system is a kind of performance evaluation and incentive system, which was put forward by Stern and Stewart Consulting Company (Stern Stewart Co.). Its purpose is to maximize shareholder's value. Economic Value Added (EVA) is the difference between a certain time of net profit after tax (NOPAT) and Capital investment. It actually reflects the certain period of economic profit of business. If the EVA's value is positive, it means the benefits gained by the company is higher than the cost of capital invested by the company. That is to say, the company creates shareholders' wealth. On the contrary, if the value is negative, it means the destruction of shareholders' wealth. With the development of security market, Investors recognize the value of investment philosophy gradually. This paper advocates for EVA-based valuation models. It assesses the enterprises value from the growth of shareholder wealth. It uses the available public information to make the evaluation more comprehensive and reflect the results more realistic. The result reflects the enterprise's intrinsic value and fair value. In this paper, the author sets up EVA-based evaluation models. With value investment as the guiding ideology and the EVA as the main line, the author uses the method of standard and case analysis to focus on the study to assess the enterprise's value based on EVA valuation model. Through the detailed application study in Sinopec's value assessment based on EVA valuation, the author explores the use of EVA in the evaluation of Chinese enterprise's value. EVA valuation model reflects the value of the business more effective, which pays more attention to the sustainable development of enterprises; EVA valuation model has broad development space in our country and it offers a new idea for value evaluation.