• Economic Value Added (EVA) improves Customer Profitability

• When most people speak about profits, they are referring to accounting profits as reported in GAAP income statements. These statements produce the "bottom line" used to measure such ratios as earnings per share and price/earnings.
  
  Stern Stewart & Co., pioneers in value-based management have long held, however, that Economic Value Added ®, or EVA, is a much more complete measure of economic profitability. EVA captures not only the income statement, but also the opportunity cost of the capital invested to generate accounting profits. Only by factoring in both of these components can a manager truly understand if he or she is creating value.
• Economic profitability incorporates the real costs of holding excess inventory, extending payment terms of investing in specialized equipment, thus yielding a true measure of the profitability of your customers.
• Acorn Systems' Enterprise Software has the capability to recognize the capital costs associated with balance sheet items and to assign these costs appropriately to each order in the system. Acorns'

• As a result, a manager can accurately compare:

• • • Stockpiling of inventory
  • • Slow cash conversions
  • • Additional investment in fixed assets

• With a customer of seemingly modest profits who:

• • • Pays quickly
  • • Takes inventory when it's ready
  • • Does not require specialized services
• Defining EVA as the right measure of customer profitability is an important first step in unlocking the potential of your organization. Making the measure a reality is a much more difficult step, made easier by Acorn Systems' advances in transaction level profitability analytics.

• Related Resources

• Time-Driven Activity-Based Costing
• Robert S. Kaplan, Harvard Business School Steven R. Anderson, Acorn Systems
• This provocative new whitepaper uses concrete examples to demonstrate how managers can obtain meaningful cost and profitability information, quickly and inexpensively
• » Read Whitepaper

• Activity Based Costing - Modified Approach
• Dr. Robert S. Kaplan, Harvard Business School
• A ground-breaking white paper that discusses the necessity of measuring costs and therefore profitability based the cost of time. This leads to accuracy in cost tracking as well as measuring resource capacity excesses and constraints.
• » Read Whitepaper

Acorn Systems Provides: Profit Analytics Software, Economic Value Added EVA Software, and Economic Profit Software

• Copyright 1999 - 2008     I     Acorn Systems, Inc. I     Site Map