This study sets five financial ratio categories -profitability, activity, safety, productivity, growth- as independent variables. And Sample used for this study was classified into 4 cases; the all company, companies showing positive EVA, companies showing negative EVA, companies divided by industry which companies involve.
This study found some differential characteristic between EVA and financial ratio in each case. The findings of this study can be summarized as follows.
In all company sample, profitability ratio did provide significant explanations of a company’s EVA for six years. While the strength of intensity of profitability ratio variables for a company’s EVA have decreased in the last six years, activity and safety ratio’s variables have stood out as critical variables explaining EVA. For companies that generated positive EVA, productivity, safety, and activity ratios had more impact on EVA than profitability ratio did. Especially efficiency of equipment investment that involved in productivity ratio explained tree times as much as in the all company sample. For companies that generated negative EVAs, safety ratio variables were proved to be decisive factors. This output could be inferred that profitability and activity ratios did not cover the required return for capital structure of companies in this sample. At last, in the industrial research, a kind of financial ratio which affected a company’s EVA depended on the characteristics of industry that a company involved in.
