EVATM AND TRADITIONAL FINANCIAL MEASURE OF BUSINESS PERFORMANCE: A STUDY ON NSE LISTED AUTOMOBILE COMPANIES

Abstract

In this article a study has been made to analyse empirically the relationship between Economic Value Added (EVA) based ranking and traditional performance indicator (namely, liquidity, profitability and efficiency ratios) based ranking. For this purpose, EVA of the select NSE listed automobile companies is calculated by making some necessary adjustments. It is observed that no single index can be formed with the help of traditional ratios. In this study, it has been found that profitability and efficiency ratios are positively correlated with the EVA, but liquidity has no impact on EVA. These findings establish that rankings based on EVA and rankings based on traditional measures (profitability and efficiency) are nearly the same