Sensitivity analysis of Economic Value Added as a dominant indicator of concept of economic profit

University of Zilina, Faculty of Operation and Economics of Transport and Communications, Department of Economics, Univerzitna 1, 010 26 Zilina, Slovakia

^* Corresponding author: dusan.karpac@fpedas.uniza.sk

Abstract

Research background: The modern goal of enterprises, value creation, is achieved through the concept of economic profit. Profit, as part of profit or loss, is one of the most important flows, pointing to how efficiently corporate capital is used in an entity (Coatney & Poliak, 2020). The article deals with the difference between accounting and economic profit, the selected form of economic profit - the EVA indicator. The economic value added (EVA) indicator is one of the best-known modern indicators of a company's performance (Siekelova et al., 2019). It shows whether the given entity increases its value or only earns for its economic survival. The benefit of this indicator is the valuation of equity and taking into account the risk. It is difficult to express the economic profit itself, therefore the article also addresses the issue of its calculation (Shah et al., 2016). The company needs to know its financial status and the direction it is heading, so we decided to calculate a selected form of economic profit.

Purpose of the article: The company needs to know its financial status and the direction it is heading, so we decided to calculate a selected form of economic profit. When expressing the value of the economic value added indicator, it is also important to know the items and components of the calculation that have the strongest meaning and effect on the possible amount of the indicator. Given this, we decided to use a sensitivity analysis, which points to the effect of individual variables that participate in the construction of the EVA calculation.

Methods: In this work, the methods of induction, deduction, and comparison were used to obtain a true picture of the subject issue. Methods of synthesis and analysis of the researched issues were also used.

Findings & Value added: In the paper there is pointed out the intensity of the impact of individual variables that entered into the calculation of the economic value added indicator as a dominant indicator of concept of economic profit.