[Verse 1] ROI can mislead when capital costs hide A twenty percent return might still destroy value inside What looks profitable on the surface gleams But subtract the financing, burst those dreams We need metrics that capture the true cost Of every dollar that investors have crossed [Chorus] Residual Income minus the charge EVA reveals if gains are large RI equals NOPAT minus cost of capital times EVA shows economic value that truly shines Subtract the hurdle, see what remains These metrics expose the real financial gains [Verse 2] Start with operating profit after tax Then multiply invested capital by the financing tracks Cost of equity blended with debt's expense Weighted average tells the true defense Against value destruction hiding in plain sight These measures pierce through accounting's sleight [Chorus] Residual Income minus the charge EVA reveals if gains are large RI equals NOPAT minus cost of capital times EVA shows economic value that truly shines Subtract the hurdle, see what remains These metrics expose the real financial gains [Bridge] When divisions compete for scarce resources RI and EVA reveal the strongest forces Positive numbers mean wealth creation flows Negative signals where value erosion grows Capital allocation becomes crystal clear When true profitability measures appear [Verse 3] Stern Stewart branded EVA's refined approach While RI follows the academic reproach Both overcome ROI's fatal flaw Of ignoring capital's expensive draw Managers optimize what gets measured most So choose metrics that matter to each corporate host [Chorus] Residual Income minus the charge EVA reveals if gains are large RI equals NOPAT minus cost of capital times EVA shows economic value that truly shines Subtract the hurdle, see what remains These metrics expose the real financial gains [Outro] Beyond the surface numbers that deceive These measures help executives achieve Decisions that create authentic worth Measuring value from the moment of birth
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