ABSTRACT
This chapter focuses on four major financial performance measures, such as return on investment (ROI), return on equity (ROE), and economic value added (EVA). It presents a review of some Japanese articles that cover financial measures in Japanese companies. Generally, ROI is composed of two factors - return on sales (ROS) and capital turnover (CT). ROS is the percentage of profits to sales, and it shows the profitability of a company. Capital turnover is the percentage of sales to investments. ROE is a measure that shows the percentage of net income to the amount invested by shareholders. There are three ways of improving ROE: increasing ROS, CT, and leverage. In addition, ROE is composed of two parts: earnings per share (EPS) and book value per share (BPS). EVA is one of the most suitable metrics for measuring corporate value. The difference of EVA® from ROI and ROE is that EVA® is the amount, while ROI and ROE are the proportion.
