Question

1. Provide an example of how feedback from customers can be used as part of a control system.

2. How does EVA give a company a more accurate picture of its profitability than does profit margin?

Answer 1

Answer 1= Let us consider the case of a footwear product. The company developed a comfortable sport running the show for the youth and launches the product in the market. In order to understand the response of the customers, the company conducts the marketing research and the finding of the research indicates that the running show has the problem of smelling when it is used more than 4 hours. This is a problem in the product characteristic or features. This feedback of the customers can be used to make some change in the product and to make the improvement in the product so that there is greater ventilation in the show and the chances of smell even during the long hour use can be overcome.

Answer 2= Economic value-added can be defined as the estimation of the economic profit of any organization or the value created in addition to the required return of the shareholders of the organization. On the other hand, the profit margin simply indicates the difference between the cost of production and the selling price. Thus it is clear that the company has a better EVA it indicates that it is able to provide a better returns to its shareholders than their expectations. Therefore with the better knowledge of EVA, greater ROI can be obtained in comparison to profit margin