The Primary Limitation of Using Economic Value Added (EVA®) to Evaluate

question 116

Multiple Choice

The primary limitation of using Economic Value Added (EVA®) to evaluate the financial performance of investment centers is:

• A) Complexity of the calculation.
• B) Dysfunctional long-term investment decisions that can be motivated by focusing on EVA®.
• C) Failure to include a measure of invested capital.
• D) Inability to use EVA® to benchmark against competitor organizations.
• E) Inability to align managerial incentives with ownership interests.

---

Definitions:

Air Traffic

The movement of aircraft within the airspace system, and the operational procedures, technical infrastructure, and personnel that control and manage it.

Property Rights

Legal rights to possess, use, and dispose of assets including real estate, intellectual property, and other possessions.

Negatively Affects

Refers to actions or factors that result in a detrimental impact on something.

Air Traffic

The regulated flow of aircraft in the sky, encompassing all aspects of airborne transportation and management.