Volume 5, Issue 1, March 2020, Page: 12-25
Operating Risk (Cost-Volume-Profit) and Economic Value Added (EVA®)
Ana Bela de Sousa Delicado Teixeira, School of Business Administration, Polytechnic Institute of Setúbal, Setúbal, Portugal
Rosa Maria Morgado Galvão, School of Business Administration, Polytechnic Institute of Setúbal, Setúbal, Portugal
Sandra Cristina Dias Nunes, School of Business Administration, Polytechnic Institute of Setúbal, Setúbal, Portugal
Received: Dec. 24, 2019;       Accepted: Jan. 2, 2020;       Published: Mar. 10, 2020
DOI: 10.11648/j.ijafrm.20200501.12      View  39      Downloads  32
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.
Keywords
Operating Risk, Value Creation, Break-even Point, Margin of Safety, EVA®
To cite this article
Ana Bela de Sousa Delicado Teixeira, Rosa Maria Morgado Galvão, Sandra Cristina Dias Nunes, Operating Risk (Cost-Volume-Profit) and Economic Value Added (EVA®), International Journal of Accounting, Finance and Risk Management. Special Issue: Perspectives on Risk Management and Impact on Sustainability of Companies. Vol. 5, No. 1, 2020, pp. 12-25. doi: 10.11648/j.ijafrm.20200501.12
Copyright
Copyright © 2020 Authors retain the copyright of this article.
This article is an open access article distributed under the Creative Commons Attribution License (http://creativecommons.org/licenses/by/4.0/) which permits unrestricted use, distribution, and reproduction in any medium, provided the original work is properly cited.
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