PARTNER Consulting, s.r.o.
Ružová dolina 7, 821 08 Bratislava

Tel.: +421 2 556 45 524
Fax.: +421 2 556 45 525

Copyright 2006 PARTNER Consulting, s.r.o.
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This area of our services may be also called the new attitudes to providing increase of the company´s equity and investment assessment; this area is still not sufficiently implemented and used in our country.

Our services:
  • Economic Value Added (EVA)
  • Activity Based Costing
  • Target Costing
  • Implementation of Balanced Scorecard
  • Deep Analysis (Due Diligence)

  • Financial efficiency criterion which is focused on values
  • It reflects an absolute growth or devaluation of the owners´ property
  • Appropriate tool for selection of the most suitable investment opportunity
  • Effective tool to prevent devaluation of the owners´ property
  • Appropriate tool for the system management
  • Criterion highly correlative to value of shares
  • Criterion which could be maximized - EVA —does not cause mistakes in management as e. g. ROI (return of investment), EPS (profit per share), operating profit, net income, etc. (maximization of these criteria does not have to lead to optimum output, maximization of the company´s value)
  • It is a good basis for managerial reward system, which motivates managers to create the value for the owners.
  • It is much more usable than ROI, especially for controlling and management of everyday operations.

EVA can be simplified to a level, which is intelligible for employees and is easily calculated in regular reporting. Its calculation requires only the basic data from the profit-and-loss statement and balance sheet. Indicator´s value reflects the company´s efficiency in absolute statement (e. g. in Sk), whereby the positive value presents equity formation and the negative value presents devaluation. Sequence of EVA negative values signals the possible necessary modification of the company´s structure.

EVA concept can be easily used and is comprehensible even to people who are not experienced in the field of financing and accounting. Therefore it is easy to explain EVA to all employees in a very short time.

Starting points of EVA method:
  • All assets items bind capital and so with all the items they are connected to capital (weighted average capital costs —WACC)
  • The company capital costs (WACC) present costs average to company´s own and borrowed capital, whereby the weights are presented by the proportion of these items in complete invested capital
  • Average capital costs present minimum required economic return, which must be reached so that the owners´ investments are not devaluated
  • However, total capital costs of the company do not reach the weighted average costs multiplied by total assets, because the company has also debts which do not bear interests and which are not related to any capital costs (therefore the total capital costs should be reduced by influence of these items).

EVA helps the whole company comprehend the fact that capital is an expensive resource. In most cases efficiency of capital use after EVA implementation was increased (increased capital turnover). EVA contributes to growth in profit, especially by means of improved capital turnover.

EVA, as a profit criterion, is the first criterion which can use maximization of its value, as a clear goal. In contrast to operating profit and return of invested capital (ROI), EVA integrates capital and growth of used capital. It simplifies the whole concept of profitability, which was complicated and ambiguous when traditional criteria were used. The main goal of each company is to increase its value. EVA connects effects of profitability and growth into one indicator and thus measures the value formation. Therefore the company maximizes its own value by long-term maximization of EVA indicator.

EVA, as the bonus system basis, unifies the owners´ goals and the company top management. The common and definite goal is thus growth of the company´s value.

ABC Method (Activity Based Costing —segmentation of costs according to activities)
This method is a modern attitude towards costs segmentation. It is an answer to all limitations included in traditional calculations. This method was published for the first time in the 80´s by CAM-I (Consortium for Advanced Manufacturing - International) —the world prominent producers of consulting and accounting companies. ABC method was very successful and was accepted by managers all over the world, thus it was spread very quickly.
ABC method was further elaborated an was proven to be a suitable tool for costs management according to activities (Activity Based Cost Management), planning and Activity Based Budgeting), assessment and Activity Based Performance and in general integrated Activity Based Management.
Controlling of activities may thus directly influence not only the costs level but also the profit, efficiency, added value and other attributes of activities and processes in the company. The methods are widely applicable in many kinds of companies, regardless their size, structure, branch or even the processes which are performed in these companies.

Target Costing
This method enables to effect the future costs even in stages before the production itself. Target Costing, or Management of target costs h is the process of changing the way of thinking, which is focused on a customer. It is the method where the target costs are derived from the future foreseen market prices.

Basic features of the method: - future products costs are derived from returns forecasted by marketing
- goal costs are formed by deducing the planned profit (operating result) from the net gain, taking the risk overplus into account
- the total product costs are bound to individual components at the rate of customers´ values
- costs divided into components present the target tasks for individual sections (in the value formation chain) —production, purchase, sales - analysis of target and standard (latest) costs deviations together with benchmarking identifies optimization potential on the level of individual components.

One of the most important contributions of Target Costing is that it secures connection with market and customer, and at the same time, with the final targets of the company since the initial stages of the product development.

Implementation of Balanced Scorecard
Hanks to Balanced Scorecard we can reach connection of strategy and development with the target of the company´s value optimization. This attitude is focused on four main areas:
  • Financial perspective
  • Customer perspective
  • Process perspective
  • Potential perspective (learning and growth)

Within these perspectives we define strategic goals, criteria, target values and measures. For implementation we use the 5-stage model:
  • Clarification of the strategy
  • Formation of organizational and frame conditions
  • Development of Balanced Scorecard,
  • Formation of the process for spreading of Balanced Scorecard to whole subject
  • Provision and optimization of Balanced Scorecard permanent use

Deep analysis (Due Diligence)
The aim of deep analysis is to find the real conditions of the company, e. i. specification and assessment of the real conditions, identification and handling of risks related to certain assets transaction, e. g. purchase, sale of the company or its part. Due Diligence helps to identify all relevant circumstances which create the chances and risks. The complex deep analysis is focused on financing and accounting, legal issues, tax issues, commercial aspects, human resources and environment.

PARTNER Consulting, Ltd. offers its help in providing indisputable advantages which follow from the due diligence.
  • Detailed view of the company´s conditions in individual areas
  • Potential risks warning and quantification of these risks
  • Possibility to find solutions more quickly through external and independent look at the company
  • Provision of information regarding the company´s conditions as a whole.