| Cons | Pros |
EVA | · Sensitive to the firm’s depreciation policy. · Presents a better and true picture of the company, as covering both operating &capital costs. · A monitoring device for gauging the financial performance of a business (especially demand capital < supply of capital when the company is the relatively incentive to changes in access to cash). | · Different depreciation policies can result in large variations in the value of the measure. · Without taking into account the impact of depreciation on cash availability. |
CVA | · No accounting adjustments are required. · Since depreciation is added back, the measure will not influence by the firm’s depreciation policy. | · Problem of different depreciation policies in EVA can be solved by including an accounting adjustment. · The removal of accruals and depreciation may lose important information required by the market when evaluating an enterprise. · The process of removing the effects of accounting accruals is also complex. · CVA values may provide conflicting signals. |