The Relationship between Economic Value Added (EVA) and Residual Income (RI) in the Predicting Future Earning Per Share (EPS)



Today most of financial analyst believes that companies for creating value should have more return than cost of capital. This concept is operationalised by applying EVA an IR. As a result of changes created by Stewart in the RI concept, EVA has become a new tool of financial performance management. Stewart believes that for evaluating internal and external performance EVA should be used instead of income and cash flow from operation. Accordingly these research investigates the relation between depended variable including EVA and RI as the proxies of the economic evaluation model and future EPS. The research hypotheses were tested by using linear regression. The results show that future EPS has a significant relation with RI but not with the EVA there for only RI has predicting power.