What is a major disadvantage of using economic value added (EVA) alone as a performance measure? a. It fails to focus on creating shareholder value. b. It promotes the acceptance of unprofitable projects. c. It fails to reflect all of the ways that value may be created. d. It discourages cost cutting.
　　a. It fails to focus on creating shareholder value.
　　b. It promotes the acceptance of unprofitable projects.
　　c. It fails to reflect all of the ways that value may be created.
　　d. It discourages cost cutting.
　　Answer:C
　　Choice “c” is correct. The requirement is to identify the major disadvantage of using EVA alone. Many times value creation activities do not immediately increase return, and EVA (in the short run) does not reflect the value of these activities.
　　Choice “a” is incorrect because a major advantage of EVA is its focus on creating shareholder value.
　　Choice “b” is incorrect because EVA does not promote the acceptance of unprofi table projects.
　　Choice “d” is incorrect because EVA encourages cost cutting activities.