Operating Risk (Cost-Volume-Profit) and Economic Value Added (EVA®)

Ana Bela de Sousa Delicado Teixeira; Rosa Maria Morgado Galvão; Sandra Cristina Dias Nunes

doi:doi:10.11648/j.ijafrm.20200501.12

| Peer-Reviewed

Operating Risk (Cost-Volume-Profit) and Economic Value Added (EVA®)

Ana Bela de Sousa Delicado Teixeira, Rosa Maria Morgado Galvão, Sandra Cristina Dias Nunes

Published in International Journal of Accounting, Finance and Risk Management (Volume 5, Issue 1)

Received: 24 December 2019 Accepted: 2 January 2020 Published: 10 March 2020

Views: Downloads:

Download PDF

Share This Article

Twitter
Linked In
Facebook

Abstract

Today, it is unquestionable the importance that organizational management is supported by indicators. Also, knowledge of value creation and operating risk are information that differentiates this management support. This study aimed to verify the relationship between the value creation generated by companies included in the sample and the indicators used in operating risk (cost-volume-profit analysis). In the literature review the concept of value creation and the indicators usually used to measure operating risk, break-even point, margin of safety, and degree of operating leverage, were presented and characterized, as well as the Economic Value Added (EVA®), which was the value-based performance measure used in the study. The sample consists of 27 non-financial companies listed in Euronext Lisbon and the period analyzed was the one between 2014 and 2018. The data were obtained through the consolidated annual accounts of the sample companies, and its analysis was performed using the multivariate statistical analysis technique, linear regression. The results showed that the estimated multiple linear regression model allowed, with a very reasonable quality, to estimate the impact that the break-even point and the margin of safety variables have on the variation of the value of EVA®. This study gives significant information showing how operating risk indicators affect value creation, which is considered one the main objectives of companies.

Published in	International Journal of Accounting, Finance and Risk Management (Volume 5, Issue 1) This article belongs to the Special Issue Perspectives on Risk Management and Impact on Sustainability of Companies
DOI	10.11648/j.ijafrm.20200501.12
Page(s)	12-25
Creative Commons	This is an Open Access article, distributed under the terms of the Creative Commons Attribution 4.0 International License (http://creativecommons.org/licenses/by/4.0/), which permits unrestricted use, distribution and reproduction in any medium or format, provided the original work is properly cited.
Copyright	Copyright © The Author(s), 2024. Published by Science Publishing Group

Keywords

Operating Risk, Value Creation, Break-even Point, Margin of Safety, EVA®

References

[1]	Pletsch, C., Reif, E., & Da Silva, T. (2015). Análise da relação entre o valor económico agregado (EVA) e os indicadores do mercado de empresas brasileiras. Rev.fac.cienc.econ., XXIII (1), 157-173.
[2]	Kijewska, A. (2016). Causal analysis of determinants influencing the Economic Value Added (EVA) – a case of Polish entity. Journal of Economics and Management, 26 (4), 52-70.
[3]	Asociacion Española de contabilidad y administracion de empresas (AECA). (1995). Documento 2, La contabilidade de gestion como instrumento de control (3ª Edição). Edicines Gráficas Ortega.
[4]	Pereira C. C. & Franco V. S. (2001). Contabilidade Analítica. Rei dos Livros.
[5]	Neves J. C. (2004). Análise Financeira, Vol. I – Técnicas Fundamentais. (13ª Edição). Texto Editores.
[6]	Obaidat, A. (2019). Is economic value added superior to earnings and cash flows in explaining market value added? An emprirical study. International Journal of Business, Accounting, and Finance, 13, 57-69.
[7]	Galvão R., Teixeira A. B. & Nunes S. (2018). Criação de Valor: Value Drivers do EVA – Estudo com empresas cotadas na Euronext Lisbon, XXVIII Jornadas Luso-Espanholas de Gestão Científica, Guarda.
[8]	Assaf Neto, A. (2014). Finanças corporativas e valor. (7ª Edição). São Paulo: Editora Atlas.
[9]	Bhasin, M. (2013). Economic Value Added and Shareholders’ Wealth Creation: Evidence from a Developing Country. International Journal of Finance and Accounting, 2 (4), 185-198.
[10]	Rappaport, A. (2001). Gerando valor para o acionista: um guia para administradores e investidores. São Paulo: Editora Atlas.
[11]	Ferreira, D. (2002a). Fusões, Aquisições e Reestruturações de Empresas – Vol. I. (1ª edição). Lisboa: Edições Sílabo.
[12]	Elgharbawy, A. & Abdel-Kader, M. (2013). Enterprise governance and value-based management: A theoretical contingency Framework. Journal of Management and Governance, 17, 99–129.
[13]	Neves, J. (2011). Avaliação e Gestão da Performance Estratégica da Empresa (2ª Edição). Lisboa: Texto Editores.
[14]	Neely, A. (2007). Business performance measurement. (2ª Edição). Cambridge: Cambridge University Press.
[15]	Venanzi, D. (2010). Financial performance measures and value creation: a review. Social Science Research Network Electronic Journal. Retrieved from: https://papers.ssrn.com/sol3/papers.cfm?abstract_id=1716209. Accessed 2017/01/31.
[16]	Nagarajan, K. (2015). Economic value added (EVA): A performance measure of strategic finance. International Journal of Research in Commerce & Management, 6 (11), 89-91, ISSN 0976-2183.
[17]	Sharma, A. K. & Kumar, S. (2012). EVA versus conventional performance measures – Empirical evidence from India. Proceedings of ASBBS – Las Vegas, Vol. 19, N. 1: 804-815.
[18]	Stewart, G. (1999). The quest for value: a guide for senior managers. Estados Unidos da América: HarperCollins publishers.
[19]	Prusty, T. (2013). Corporate Governance through the EVA Tool: A Good Corporate Performance Driver. Journal of Asian Business Strategy, 3 (12), 340-348.
[20]	Sabol, A. & Sverer, F. (2017). A Review of the Economic Value Added Literature and Application. Special issue, UTMS Journal of Economics, 8 (1), 19–27.
[21]	Ferreira, D. (2002b). Fusões, Aquisições e Reestruturações de Empresas – Vol. II. (1ª edição). Lisboa: Edições Sílabo.
[22]	Stancu, I., ObrejaBraşoveanu, L., Ciobanu, A., & Stancu, A. (2017). Are Company Valuation Models the Same? - A Comparative Analysis Between the Discounted Cash Flows (DCF), the Adjusted Net Assets, Value and Price Multiples, the Market Value Added (MVA) and the Residual Income (RI) Models. Economic Computation & Economic Cybernetics Studies & Research, 51 (3), 5-20.
[23]	Martin, J., Petty, J. & Wallace, J. (2009). Value-based management with corporate social responsibility. (2ª Edição). Nova York: Oxford University press.
[24]	Sirbu, A. (2012). Economic Value Added (EVA) Approach in Russia. Concepts. Approaches. Instruments. Review of International Comparative Management, 13 (2), 305-312.
[25]	Young, S. & O’Byrne, S. (2003). EVA e Gestão Baseada em Valor: Guia prático para implementação. Porto Alegre: Bookman.
[26]	Guni, C. & Munteanu, V. (2014). The added economic value – an instrument for the performance measurement. Economics, Management, and Financial Markets, 9 (4), 167–174.
[27]	Damodaran, A. (2001). Corporate Finance: Theory and Practice (2nd edition). New York: John Wiley & Sons.
[28]	Neves, J. (2012). Análise e Relato Financeiro - Uma visão integrada de gestão. (5ª Edição). Lisboa: Texto Editores.
[29]	Sharma, A. K. & Kumar, S. (2010). Economic Value Added (EVA) - Literature Review and Relevant Issues. International Journal of Economics and Finance, 2 (2), 200-220.
[30]	Teixeira A. B. & Daniel, N. (2016). O Custeio variável e o risco do Negócio. Revista de Contabilidade e Controladoria, Universidade Federal do Paraná, Curitiba, 8 (1), 8-25, ISSN 1984-6266.
[31]	Franco V., Oliveira A., Morais A. I., Oliveira B., Lourenço I., Major M. J., Jesus M. A. & Serrasqueiro R. (2008). Temas de Contabilidade de Gestão, os custos, os resultados e a informação para gestão. Livros Horizonte.
[32]	Caiado A. P. (2009). Contabilidade Analítica e de Gestão. (5ª Edição). Áreas Editora.
[33]	Prodanov, C. & Freitas, E. (2013). Metodologia do trabalho científico: Métodos e Técnicas da Pesquisa e do Trabalho Acadêmico (2ª edição). Rio Grande do Sul, Brasil: Universidade FEEVALE.
[34]	Silva, E. & Menezes, E. (2005). Metodologia da Pesquisa e Elaboração de Dissertação (4ª Edição). Florianópolis: UFSC. Retrieved from: https://projetos.inf.ufsc.br/arquivos/Metodologia_de_pesquisa_e_elaboracao_de_teses_e_dissertacoes_4ed.pdf. Accessed 2019/10/01.
[35]	Yin, R. (2010). Estudo de Caso. Planejamento e Métodos. (2ª Edição). Porto Alegre: Bookman Editora.
[36]	Gil, A. (2010). Como elaborar projetos de pesquisa. (5º edição). São Paulo: Editora Atlas.
[37]	Euronext Lisbon. Accessed 2019/08/13. https://www.bolsadelisboa.com.pt/.
[38]	Pestana, M. & Gageiro, J. (1998). Análise de dados para ciências sociais – A complementaridade do SPSS. (1ª Edição). Lisboa: Edições Sílabo.

Cite This Article

Plain Text BibTeX RIS

APA Style

Ana Bela de Sousa Delicado Teixeira, Rosa Maria Morgado Galvão, Sandra Cristina Dias Nunes. (2020). Operating Risk (Cost-Volume-Profit) and Economic Value Added (EVA®). International Journal of Accounting, Finance and Risk Management, 5(1), 12-25. https://doi.org/10.11648/j.ijafrm.20200501.12

Copy | Download

ACS Style

Ana Bela de Sousa Delicado Teixeira; Rosa Maria Morgado Galvão; Sandra Cristina Dias Nunes. Operating Risk (Cost-Volume-Profit) and Economic Value Added (EVA®). Int. J. Account. Finance Risk Manag. 2020, 5(1), 12-25. doi: 10.11648/j.ijafrm.20200501.12

Copy | Download

AMA Style

Ana Bela de Sousa Delicado Teixeira, Rosa Maria Morgado Galvão, Sandra Cristina Dias Nunes. Operating Risk (Cost-Volume-Profit) and Economic Value Added (EVA®). Int J Account Finance Risk Manag. 2020;5(1):12-25. doi: 10.11648/j.ijafrm.20200501.12

Copy | Download

@article{10.11648/j.ijafrm.20200501.12,
  author = {Ana Bela de Sousa Delicado Teixeira and Rosa Maria Morgado Galvão and Sandra Cristina Dias Nunes},
  title = {Operating Risk (Cost-Volume-Profit) and Economic Value Added (EVA®)},
  journal = {International Journal of Accounting, Finance and Risk Management},
  volume = {5},
  number = {1},
  pages = {12-25},
  doi = {10.11648/j.ijafrm.20200501.12},
  url = {https://doi.org/10.11648/j.ijafrm.20200501.12},
  eprint = {https://article.sciencepublishinggroup.com/pdf/10.11648.j.ijafrm.20200501.12},
  abstract = {Today, it is unquestionable the importance that organizational management is supported by indicators. Also, knowledge of value creation and operating risk are information that differentiates this management support. This study aimed to verify the relationship between the value creation generated by companies included in the sample and the indicators used in operating risk (cost-volume-profit analysis). In the literature review the concept of value creation and the indicators usually used to measure operating risk, break-even point, margin of safety, and degree of operating leverage, were presented and characterized, as well as the Economic Value Added (EVA®), which was the value-based performance measure used in the study. The sample consists of 27 non-financial companies listed in Euronext Lisbon and the period analyzed was the one between 2014 and 2018. The data were obtained through the consolidated annual accounts of the sample companies, and its analysis was performed using the multivariate statistical analysis technique, linear regression. The results showed that the estimated multiple linear regression model allowed, with a very reasonable quality, to estimate the impact that the break-even point and the margin of safety variables have on the variation of the value of EVA®. This study gives significant information showing how operating risk indicators affect value creation, which is considered one the main objectives of companies.},
 year = {2020}
}

Copy | Download

TY  - JOUR
T1  - Operating Risk (Cost-Volume-Profit) and Economic Value Added (EVA®)
AU  - Ana Bela de Sousa Delicado Teixeira
AU  - Rosa Maria Morgado Galvão
AU  - Sandra Cristina Dias Nunes
Y1  - 2020/03/10
PY  - 2020
N1  - https://doi.org/10.11648/j.ijafrm.20200501.12
DO  - 10.11648/j.ijafrm.20200501.12
T2  - International Journal of Accounting, Finance and Risk Management
JF  - International Journal of Accounting, Finance and Risk Management
JO  - International Journal of Accounting, Finance and Risk Management
SP  - 12
EP  - 25
PB  - Science Publishing Group
SN  - 2578-9376
UR  - https://doi.org/10.11648/j.ijafrm.20200501.12
AB  - Today, it is unquestionable the importance that organizational management is supported by indicators. Also, knowledge of value creation and operating risk are information that differentiates this management support. This study aimed to verify the relationship between the value creation generated by companies included in the sample and the indicators used in operating risk (cost-volume-profit analysis). In the literature review the concept of value creation and the indicators usually used to measure operating risk, break-even point, margin of safety, and degree of operating leverage, were presented and characterized, as well as the Economic Value Added (EVA®), which was the value-based performance measure used in the study. The sample consists of 27 non-financial companies listed in Euronext Lisbon and the period analyzed was the one between 2014 and 2018. The data were obtained through the consolidated annual accounts of the sample companies, and its analysis was performed using the multivariate statistical analysis technique, linear regression. The results showed that the estimated multiple linear regression model allowed, with a very reasonable quality, to estimate the impact that the break-even point and the margin of safety variables have on the variation of the value of EVA®. This study gives significant information showing how operating risk indicators affect value creation, which is considered one the main objectives of companies.
VL  - 5
IS  - 1
ER  -

Copy | Download

Author Information

Ana Bela de Sousa Delicado Teixeira

School of Business Administration, Polytechnic Institute of Setúbal, Setúbal, Portugal
Rosa Maria Morgado Galvão
Sandra Cristina Dias Nunes

School of Business Administration, Polytechnic Institute of Setúbal, Setúbal, Portugal

Download PDF

Sections

Plain Text BibTeX RIS

APA Style

Ana Bela de Sousa Delicado Teixeira, Rosa Maria Morgado Galvão, Sandra Cristina Dias Nunes. (2020). Operating Risk (Cost-Volume-Profit) and Economic Value Added (EVA®). International Journal of Accounting, Finance and Risk Management, 5(1), 12-25. https://doi.org/10.11648/j.ijafrm.20200501.12

Copy | Download

ACS Style

Ana Bela de Sousa Delicado Teixeira; Rosa Maria Morgado Galvão; Sandra Cristina Dias Nunes. Operating Risk (Cost-Volume-Profit) and Economic Value Added (EVA®). Int. J. Account. Finance Risk Manag. 2020, 5(1), 12-25. doi: 10.11648/j.ijafrm.20200501.12

Copy | Download

AMA Style

Ana Bela de Sousa Delicado Teixeira, Rosa Maria Morgado Galvão, Sandra Cristina Dias Nunes. Operating Risk (Cost-Volume-Profit) and Economic Value Added (EVA®). Int J Account Finance Risk Manag. 2020;5(1):12-25. doi: 10.11648/j.ijafrm.20200501.12

Copy | Download

@article{10.11648/j.ijafrm.20200501.12,
  author = {Ana Bela de Sousa Delicado Teixeira and Rosa Maria Morgado Galvão and Sandra Cristina Dias Nunes},
  title = {Operating Risk (Cost-Volume-Profit) and Economic Value Added (EVA®)},
  journal = {International Journal of Accounting, Finance and Risk Management},
  volume = {5},
  number = {1},
  pages = {12-25},
  doi = {10.11648/j.ijafrm.20200501.12},
  url = {https://doi.org/10.11648/j.ijafrm.20200501.12},
  eprint = {https://article.sciencepublishinggroup.com/pdf/10.11648.j.ijafrm.20200501.12},
  abstract = {Today, it is unquestionable the importance that organizational management is supported by indicators. Also, knowledge of value creation and operating risk are information that differentiates this management support. This study aimed to verify the relationship between the value creation generated by companies included in the sample and the indicators used in operating risk (cost-volume-profit analysis). In the literature review the concept of value creation and the indicators usually used to measure operating risk, break-even point, margin of safety, and degree of operating leverage, were presented and characterized, as well as the Economic Value Added (EVA®), which was the value-based performance measure used in the study. The sample consists of 27 non-financial companies listed in Euronext Lisbon and the period analyzed was the one between 2014 and 2018. The data were obtained through the consolidated annual accounts of the sample companies, and its analysis was performed using the multivariate statistical analysis technique, linear regression. The results showed that the estimated multiple linear regression model allowed, with a very reasonable quality, to estimate the impact that the break-even point and the margin of safety variables have on the variation of the value of EVA®. This study gives significant information showing how operating risk indicators affect value creation, which is considered one the main objectives of companies.},
 year = {2020}
}

Copy | Download

TY  - JOUR
T1  - Operating Risk (Cost-Volume-Profit) and Economic Value Added (EVA®)
AU  - Ana Bela de Sousa Delicado Teixeira
AU  - Rosa Maria Morgado Galvão
AU  - Sandra Cristina Dias Nunes
Y1  - 2020/03/10
PY  - 2020
N1  - https://doi.org/10.11648/j.ijafrm.20200501.12
DO  - 10.11648/j.ijafrm.20200501.12
T2  - International Journal of Accounting, Finance and Risk Management
JF  - International Journal of Accounting, Finance and Risk Management
JO  - International Journal of Accounting, Finance and Risk Management
SP  - 12
EP  - 25
PB  - Science Publishing Group
SN  - 2578-9376
UR  - https://doi.org/10.11648/j.ijafrm.20200501.12
AB  - Today, it is unquestionable the importance that organizational management is supported by indicators. Also, knowledge of value creation and operating risk are information that differentiates this management support. This study aimed to verify the relationship between the value creation generated by companies included in the sample and the indicators used in operating risk (cost-volume-profit analysis). In the literature review the concept of value creation and the indicators usually used to measure operating risk, break-even point, margin of safety, and degree of operating leverage, were presented and characterized, as well as the Economic Value Added (EVA®), which was the value-based performance measure used in the study. The sample consists of 27 non-financial companies listed in Euronext Lisbon and the period analyzed was the one between 2014 and 2018. The data were obtained through the consolidated annual accounts of the sample companies, and its analysis was performed using the multivariate statistical analysis technique, linear regression. The results showed that the estimated multiple linear regression model allowed, with a very reasonable quality, to estimate the impact that the break-even point and the margin of safety variables have on the variation of the value of EVA®. This study gives significant information showing how operating risk indicators affect value creation, which is considered one the main objectives of companies.
VL  - 5
IS  - 1
ER  -

Copy | Download