Abstract:
Evaluating the company’s financial performance is important for the related parties to know the manager’s effectiveness in managing the company’s assets to generate more profit and offer the higher return of money that being invested by the shareholders. The methods that are used by the researcher to evaluate the company’s financial performance by considering both, profit and return of capital invested, are return on investment, residual income and economic value added. Through these methods, the researcher can evaluate the company’s financial performance and determine which method provides useful information for the managers to evaluate the company’s financial performance.
According to the result, the performance of PT X which evaluated by Return on Investment shows that the performance in 2009 is better than performance in 2010 and 2011 while performance of PT X in 2011 is worse than performance in 2009 and 2010. By using Residual Income, it shows that the performance of PT X in 2011 is good whereas the performance of PT X in 2009 and 2010 is bad. Different from Return on Investment and Residual Income, the Economic Value Added calculation shows that all financial performance of PT X within three years is good.
According to the result, the researcher has several recommendations for the company such as the managers should evaluate the company’s performance in dollar amount rather than the percentage and the managers must consider the performance of company in the long-run rather than short-run performance. Thus, the researcher recommends economic value added to support the long-term decision and company’s development.
