Financial Performance

We all know about the “bottom line,” where revenues minus costs equals profits. Financial performance is all about that bottom line.

Financial performance is a general measure of how effective a business is at making profits with its assets. The more a business can make from fewer assets, the better, whether you’re an investor or manager (and maybe even if you’re an employee).

Financial performance is more of a general term than it is a specific measurement. Lots of metrics and calculations fall under the umbrella of “financial performance,” like operating income and cash flow.

You're a portfolio manager up 8% this year in a market (think: S&P 500) that's up 12%. Nothing to celebrate: You destroyed 4% of your portfolio for one reason or another. Your financial performance...sucked.