Capital Efficiency Measures in Industrial Business-It Is Time to Critically Review These Calculations

摘要

Capital efficiency measures like economic value added (EVA) and return on capital employed (ROCE) have been developed and are regularly used by many industrial companies to avoid short-term bias and provide stakeholders with valuable insight into the long-term ability of a company to create value. In recent years, new models have emerged (partly promoted by the financial industry), which in turn attract management teams to optimize those capital efficiency figures without appropriately considering both underlying risk and long-term benefit for the companies' stakeholders. This article highlights examples where this is practiced by shifting of financing sources in order to achieve an artificial improvement of those figures. It also provides suggestions to avoid such misleading results in the future.