The Study Of Businesses' Total Budget Managing System Based On EVA

The Budget Management of modern concept has been applied in business in China and abroad,since it was built in Du Pont Company and General Electric Company in the beginning of 20 century. It has played an very important role in business management system. With the social development and economic globalization, value creation has become the starting point and the final point of all businesses'activities. Share holders'profits has been the significant task and sought by all companies. The effective managing tools can make the value-created come true. But how can the traditional budget management adjust itself to the environment changed and fit to fulfill the value creation has become a very practical and urgent task.Economic value added (EVA) originated from the profit concept of economics. It is the residual income that will make up all costs including share holders'opportunistic cost of their capital. American Stern & Stewart company started the managing system, policy making system and stimulating system of financial affairs based on EVA in 1982. It's basic thought is that the company must earn a profit above the capital cost to make share holders' wealth maximized. EVA actually is a tool of economic profit measurement and value management, so State-owned assets supervision and administration commission of the state council decided EVA as an important standard involved in the achievement assessing system.The thesis discusses the present situation and problems of total budget management, especially points out that present total budget management target has deviated from company's value creation target, and emphasizes that it is necessary to bring in EVA concept and construct the total budget managing system based on EVA. The thesis analyses the basic theories supporting EVA, and finds out the theories holding up that EVA should be introduced into the budget managing system.The thesis constructs the modal of total budget managing system based on EVA. The model includes constructing principles, content, fulfillment, controlling, assessment, and so on.Last but not lest, The thesis takes A petrifying company as an example:analysing of the company's present management situation, pointing out the problems of budget management, and providing effective suggestions of building total budget managing system based on EVA.The contingency theory shows that managing style should adapt itself to the changing environment. Traditional budget management must take in advanced managing thoughts and methods to meet the standards of modern management. We should admit that there are some disadvantages in EVA theory, so the total budget managing system based on EVA should be developed and improved consistently in practice.