Product Profitability Analysis Based on EVA and ABC

Chen Lin, Shuangyuan Wang, Zhilin Qiao


On the purpose of maximizing shareholders’ value, the profitability analysis established on the basis of
traditional accounting earnings cannot meet the demands of providing accurate decision-making information for
enterprises. Therefore, this paper implements the Activity Based Costing (ABC) and the Economic Value Added
(EVA) into the traditional profitability analysis system, sets up an improved EVA-ABC based profitability
analysis system as well as its relative indexes, and applies it to the study of the capability of profitability. The
results show that the improved system can minimize the impacts of accounting policies, objectively reflects the
operating performance of an enterprise, and provides more accurate information to decision makers.

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