As a CFO, you are evaluating the performance of three divisions of your company using both measures?

As a CFO, you are evaluating the performance of three divisions of your company using both measures—Return on Investment (ROI; %) and Economic Value Added (EVA; $). Note that ROI is measured by dividing net income by the total capital employed.

Explain the difference between ROI and EVA as a performance measure, other than their units (% vs. $). If in a given year a division has a positive ROI but a negative EVA, what would that mean? Explain also why that would happen.

Instructions:

Please post your initial response by 23:59 EST Day 3 of the Week, and comments on the posts of at least two classmates by 23:59 EST Due Date.

You must first post your own response directly to the Discussion Topics by Day 3 before accessing other students’ responses. In addition, you should post at least TWO thoughtful and substantive responses to other classmates’ answers/comments by the due date in order to earn 5 points for each Discussion Topic. A mere “Yes, I agree” or “No, I don’t agree” type of responses will not be given any credit.

Additional bonus credit may be given to substantive responses reflecting additional research with sources of information clearly identified as they are particularly valued and enrich our online learning.

Concluding comments on each Discussion Topic will be posted on the Discussion folder after due date.