Accompanying Teaching Notes

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Notes

Economic Value Added (EVA), a financial measure patented by Stern Stewart & Co., is an extension of residual income and tries to capture earnings after cost of capital. The actual measure can include several adjustments to income (net operating profit after taxes (NOPAT)). The concept is covered in most managerial accounting texts, and if the case is used before the chapter, a brief introduction to the basic concept will suffice for students to follow along with the rest of the case.

Ittner et al. (2003) note that there could be problems such as difficulty in determining weights, ‘game-playing,’ and the possibility that bonuses will be paid even if performance is ‘unbalanced with regard to selected measures.’ Kaplan and Norton (2004b) address some of these objections. Additionally, as Banker et al. (2004) point out, communication of strategy supports the use of measures for evaluation.

International Iron and Steel Institute (IISI) is the steel industry association that represents over 190 steel producers (including the world's 20 largest steel companies), national and regional steel industry associations, and steel research institutes (www.worldsteel.org). World Steel Dynamics (WSD) is a leading steel information service based in New Jersey (www.worldsteeldynamics.com/).