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The basis of this paper is a critical review of an article published in this journal, by Zafiris and Bayldon (JAAR, 5, 2, 2000), on Economic Value Added and Market Value Added. This review provides a detailed critique of the literature relating to EVA® and the underlying philosophy of the use of EVA® as a performance metric. Following this, there is a comment on the analysis provided by Zafiris and Bayldon and a review of the empirical evidence presented in support of their analysis. The paper demonstrates that the amendments to the EVA® model proposed by Zafiris and Bayldon are not original and are unlikely to result in a significant improvement to the usefulness of the original model.

The current search for operational criteria and tests of firm performance is largely focused on the Economic Value Added (EVA) framework. While reasserting the essential soundness of this approach the paper seeks to improve its application by proposing a version of EVA which anchors the opportunity cost of equity capital on market rather than book values. The case for this is argued on general grounds and the resulting model is convenient for examining the possible effects of the gearing factor. The practicability of the model is illustrated by applying the proposed ‘EVA’ formula to a mixed set of accounting and stock market data from a sample of UK companies.

Annual changes in financial ratio values are susceptible to ambiguous interpretation because of different applications of generally accepted accounting principles and different numerator/denominator component selections. The paper investigates financial ratio disclosure within annual reports, and the extent to which the underlying ratio components vary within and between companies, within industries and over time. Financial ratios disclosed voluntarily within the annual reports of 101 listed public companies in Hong Kong between 1988–1992 were examined. Findings indicate numerator‐denominator inconsistency between companies and industries at a point in time, but generally consistent within companies across time. Also, sets of ratios reported between years are not constant. Ten potential research questions about financial ratios have been identified.