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What’s Really Wrong with RONA, and What’s Better?
In this paper our CEO Bennett Stewart explains why rate-of-return measures like RONA and ROI inevitably mislead managers into making serious mistakes in allocating capital and in even basic management decisions. CFO’s should stop using RONA and ROI, he argues, and should instead make capital a cost, a charge to profit, like any other cost, and then get everyone to focus on maximizing the growth rate in the residual economic profit