Which of the Following Is Not a Problem with EVA

question 24

Multiple Choice

Which of the following is not a problem with EVA?

• A) EVA cannot be used to measure the profitability of a private company
• B) EVA cannot be used to compare the effectiveness of managers with different amounts of assets under their control
• C) EVA assumes that the book values of assets are equal to their current worth
• D) EVA assumes that you know the cost of capital

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Definitions:

IFRS

International Financial Reporting Standards, a set of global accounting standards that guide the financial reporting of public companies.

Statement of Cash Flows

A financial documentation that illustrates the effect of changes in balance sheet accounts and profit on cash and cash equivalents, dividing the analysis into categories of operating, investing, and financing activities.

Noncash Investing

Investing activities that do not involve the immediate outflow of cash, such as acquiring assets through finance leases.

Financing Activities

Financing activities are transactions involving changes in the size and composition of the equity and borrowings of a company.