`Managing for shareholder value' and `shareholder value creation' have become the widely accepted corporate objectives since the last decade. Most of the companies in India are still in the dark about what exactly they are supposed to do for managing shareholder value, though virtually they all say that they are doing it. For the real key to create wealth, a business enterprise has to earn economic returns to its owners for its economic survival. In a market-driven economy, there are a number of firms that create wealth, whereas others certainly destroy it. Economic Value Added (EVA), being a value-based measure, assists investors with wealth discovery and company-selection processes. In the present study, an attempt has been made to explain the application of EVA principles for the evaluation of companies and industries. It highlights and explains all the elements that find place in EVA computations like calculations of Return on Invested Capital (ROIC), Weighted Average Cost of Capital (WACC), cost of debt, cost of equity as per Capital Asset Pricing Model (CAPM), cost of preference capital, and finally of EVA. Taking a sample from India's most valuable companies, the study shows that on an average, about 48% of the companies are actually wealth destroyers. It is quite shocking that of the 12 years study period, from 1996-2007, the sample registered negative EVA for eight years consecutively (1996-2002). Hence, the study raises a question as to whether this is a sufficient achievement for India's so-called most valuable companies or not. Finally, the study provides the implications of the findings on corporate business strategies of Indian companies and advocates a few suggestions.

The common misconception in today's corporate world is that most owners and managers believe that shareholder wealth increases with an increase in a company's standard accounting measures like profits, Earnings Per Share (EPS), Dividend Per Share (DPS), etc. But, these Generally Accepted Accounting Practices (GAAP)-based accounting measures just reflect accounting numbers which can be easily manipulated to reflect the company as more profitable than what it actually is in reality. This may present at first, misleading information to the company's shareholders, and secondly, may create a sense of complacency among managers that keep them away from looking for further opportunities to add value. Hence, the true reality of a company's success or failure is not exhibited by its accounting reality, but rather through its economic reality that deals with the intrinsic values being added or destroyed by the company.

Economic Value Added (EVA) is the financial measure developed by Stern Stewart & Co. that emphasizes on the economic profits and values being created or eroded by a company. EVA is similar to the conventional accounting measures of profits, but with two important differences—it considers the cost of `all' capital and is not constrained by GAAP. The net income figures reported in the profit and loss accounts consider only the most visible type of capital cost, i.e., interest, while completely ignoring the cost of equity capital as reflected by shareholders' required return on common stock. Proponents of EVA argue that measures of performance that overlook such costs cannot reveal the actual view of a company's value creation/addition. Further, to measure real economic profits, EVA proponents have also recommended a series of adjustments to eliminate distortions arising from GAAP. These have been discussed later in this paper.

Accounting Research and Audit Practices Journal, Earnings Per Share, EPS, Dividend Per Share, DPS, Generally Accepted Accounting Practices, GAAP, Economic Value Added , EVA, Weighted Average Cost of Capital, WACC, Return on Invested Capital , ROIC, Non-Banking Financial Companies, NBFCs, Cash Operating Taxes, Capital Asset Pricing Model, CAPM, Economic Reforms.