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DOI :10.26650/MED.1329674   IUP :10.26650/MED.1329674    Full Text (PDF)

Metric Conflict in Financial Analysis: A Comparison and Application of EBITDA and EVA

Hasan Yalçın

The aim of this study is to examine the differences and similarities between economic value added (EVA) and earnings before interest, depreciation, and taxes (EBITDA), two metrics commonly used in financial performance measurement. EVA and EBITDA are important tools used in evaluating company performance and profitability and differ in terms of the financial components they use. While EBITDA is a metric suitable for calculation based on financial statements, the requirement of additional company-specific information for calculating the EVA metric causes it to be left behind in terms of market application. However, the study is important in terms of emphasizing the difference in importance the two metrics have for businesses. The research includes the application and calculation of the metrics covered in the study on the case of Turkish Airlines Inc. (THY). When examining the research findings, the fact that both the EBITDA and EVA metric values for THY are positive shows it to have the appearance of being a value-creating company.

Keywords: Financial Statements Analysis, EBITDA, EVA
JEL Classification : M40 , M41
DOI :10.26650/MED.1329674   IUP :10.26650/MED.1329674    Full Text (PDF)

Finansal Analizde Metrik Çatışması: FAVÖK ve EVA Karşılaştırması ve Bir Uygulama

Hasan Yalçın

Bu çalışmanın amacı, finansal performans ölçümünde yaygın olarak kullanılan iki metrik olan Ekonomik Katma Değer (EVA) ve Faiz, Amortisman ve Vergi Öncesi Kazanç (FAVÖK) arasındaki farklılıkları ve benzerlikleri incelemektir. EVA ve FAVÖK metrikleri, şirket performansını ve kârlılığını değerlendirmede kullanılan önemli araçlar olup; farklı finansal bileşenleri kullanmaları bakımından ayrışmaktadırlar. FAVÖK, finansal tablo temelli hesaplamaya uygun bir metrik iken; EVA metriği hesaplanması için işletmeye özgü ek bilgiler gerekliliği, EVA metriğinin piyasa uygulanması açısından geri planda kalmasına yol açmakla birlikte, çalışma iki metriğin işletmeler açısından farklı önemlerini vurgulamak açısından önem arz etmektedir. Araştırma, çalışma kapsamında ele alınan metriklerin Türk Hava Yolları A.Ş. örneği üzerinden uygulanmasını ve hesaplanmasını içermekte olup, araştırmanın bulguları incelendiğinde; THY’na ait hem FAVÖK hem de EVA metrik değerlerinin pozitif olması işletmenin katma değer yaratan bir işletme görünümüne sahip olduğunu göstermektedir.

Keywords: Finansal Tablolar Analiz, FAVÖK, EVA
JEL Classification : M40 , M41

EXTENDED ABSTRACT


This study presents a comparative analysis of two financial performance measurement metrics: economic value added (EVA) and earnings before interest, depreciation, and taxes (EBITDA). Both metrics are used to evaluate companies’ financial performance, and while the EBITDA metric focuses on companies’ operational profitability, the EVA metric focuses on overall profitability by including the cost of capital in its calculations. In this respect, the EVA metric tries to determine whether a company is generating more value than it spends to finance its operations. Both of these metrics provide valuable insight into companies’ financial performance and can be used to evaluate the effectiveness of management decisions. 

The study also includes the historical developments, definitions, formulations, and comparisons of the EBITDA and EVA metrics by explaining the strong and weak aspects of both measures and emphasizing how both measures are widely used in the business world. When examining the two metrics in terms of sectoral application, the EBITDA metric can be seen to be used more frequently in capital-intensive sectors, while the EVA metric is found to be more useful in sectors where intellectual property and other intangible assets play a larger role in creating value. Within the scope of the research, the EBITDA metric is emphasized to have a broader area of application in short-term planning, while the EVA metric can be used for long-term strategic planning. The EBITDA metric can be calculated based on financial statements, while the EVA metric can be calculated by considering additional data beyond financial statement data. In this regard, the EVA metric is found to not have as much applicability as the EBITDA metric due to the need for additional information.

The literature review that has been conducted within the scope of the research shows an extremely low number of studies to have compared the EBITDA and EVA metrics together, and on this point, important studies are seen in the international literature. In this context, the current research is one of the rare studies in the literature to have compared EBITDA and EVA values. When examining the literature in Türkiye, different studies are found to have considered EBITDA and EVA values as financial performance criteria, with an extremely low number of studies having compared the EBITDA and EVA metrics and evaluated their advantages and disadvantages.

This study examines within its scope the application of these metrics on the case of Turkish Airlines Inc. (THY), which has been considered the most valuable brand in Türkiye consecutively between 2018-2022. Another reason for considering THY within the scope of the research is that ranks first in terms of BIST trading volume. The study uses data that were accessed from the Public Disclosure Platform (KAP) and THY’s official website. The research findings show both the EBITDA and EVA metric values for THY to be positive, thus giving THY the appearance of a value-creating company.

In conclusion, this study provides a comprehensive overview of how the EVA and EBITDA metrics can be used to evaluate a company’s financial performance. Each of these metrics has its advantages and disadvantages, and which metric to use depends on the company’s goals and objectives.

When examining the study’s obtained findings; future studies and researchers are recommended to conduct research and analyses aimed at a long-term comparison of the EBITDA and EVA metrics. The suggestion is also made to integrate the EBITDA metric, which is based on financial statements, into the generally accepted format of financial statements and to provide stakeholders with additional information on company websites and in the footnotes of financial statements about the EVA metric, especially for companies in the investor relations sector. Having investors and stakeholders include EVA metric values in addition to the EBITDA metric in price determination reports is undeniably important, particularly during public offering periods. In this context, the use of EVA metric data in all calculations for companies that have a negative EVA value but a positive EBITDA metric value underlines the importance of assessing both metrics together. 


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APA

Yalçın, H. (2024). Metric Conflict in Financial Analysis: A Comparison and Application of EBITDA and EVA. Journal of Accounting Institute, 0(70), 39-57. https://doi.org/10.26650/MED.1329674


AMA

Yalçın H. Metric Conflict in Financial Analysis: A Comparison and Application of EBITDA and EVA. Journal of Accounting Institute. 2024;0(70):39-57. https://doi.org/10.26650/MED.1329674


ABNT

Yalçın, H. Metric Conflict in Financial Analysis: A Comparison and Application of EBITDA and EVA. Journal of Accounting Institute, [Publisher Location], v. 0, n. 70, p. 39-57, 2024.


Chicago: Author-Date Style

Yalçın, Hasan,. 2024. “Metric Conflict in Financial Analysis: A Comparison and Application of EBITDA and EVA.” Journal of Accounting Institute 0, no. 70: 39-57. https://doi.org/10.26650/MED.1329674


Chicago: Humanities Style

Yalçın, Hasan,. “Metric Conflict in Financial Analysis: A Comparison and Application of EBITDA and EVA.” Journal of Accounting Institute 0, no. 70 (Nov. 2024): 39-57. https://doi.org/10.26650/MED.1329674


Harvard: Australian Style

Yalçın, H 2024, 'Metric Conflict in Financial Analysis: A Comparison and Application of EBITDA and EVA', Journal of Accounting Institute, vol. 0, no. 70, pp. 39-57, viewed 22 Nov. 2024, https://doi.org/10.26650/MED.1329674


Harvard: Author-Date Style

Yalçın, H. (2024) ‘Metric Conflict in Financial Analysis: A Comparison and Application of EBITDA and EVA’, Journal of Accounting Institute, 0(70), pp. 39-57. https://doi.org/10.26650/MED.1329674 (22 Nov. 2024).


MLA

Yalçın, Hasan,. “Metric Conflict in Financial Analysis: A Comparison and Application of EBITDA and EVA.” Journal of Accounting Institute, vol. 0, no. 70, 2024, pp. 39-57. [Database Container], https://doi.org/10.26650/MED.1329674


Vancouver

Yalçın H. Metric Conflict in Financial Analysis: A Comparison and Application of EBITDA and EVA. Journal of Accounting Institute [Internet]. 22 Nov. 2024 [cited 22 Nov. 2024];0(70):39-57. Available from: https://doi.org/10.26650/MED.1329674 doi: 10.26650/MED.1329674


ISNAD

Yalçın, Hasan. “Metric Conflict in Financial Analysis: A Comparison and Application of EBITDA and EVA”. Journal of Accounting Institute 0/70 (Nov. 2024): 39-57. https://doi.org/10.26650/MED.1329674



TIMELINE


Submitted19.07.2023
Accepted11.12.2023
Published Online07.03.2024

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