Measuring a company's performance: The identification of correlation between EVA and selected financial indicators with use of genetic algorithm

Abstract

This paper deals with topic of measuring company's performance using different concepts, tools and indicators. It defines the requirements on a concept or an indicator to reflect the real performance of a company, comparing value-based concepts and the traditional financial analysis indicators. The authors demonstrate their results of a survey on an extensive sample of companies in the Czech Republic, and conclude that the use of traditional financial indicators hugely prevails, despite the value based indicators demonstrate much stronger connection to the market value of companies. The authors inquire into a question whether some relationship between the value of selected value-based concept of Economic Value Added (EVA) and the selected indicators of traditional financial analysis may be found using genetic algorithms for clustering into different groups of performance. They show that, to a certain degree of probability, this relationship may be proved with selected parameters.