In companies, we often talk about financial performance – at company and business unit level. But what do we actually mean by financial performance and how do we measure it? The answer is often ‘it depends’ because companies may choose to focus on different measures depending on the specific challenges and priorities that they face.
However, an awareness of the broad range of financial performance measures and metrics is critical for any reward professional.
In this session we will develop a critical understanding of the most important financial performance metrics. We will consider the strengths and weaknesses of each measure in different business contexts, their use by investment analysts and their deployment in acquisition models. We will look at how and when these measures should be incorporated into specific performance and reward interventions.
Measures we will examine will include:
- Total Shareholder Return (TSR) – (both relative and absolute)
- Earnings Before Interest, Tax, Depreciation & Amortisation (EBITDA)
- Definitions of ‘Profit’: PBT / PAT / PBIT / Adjusted Operating Profit
- Return on Capital Employed (ROCE)
- Economic Value Added (EVA) and Economic Profit (EP).
The style of this event will be practical and informative. We will also examine a number of case studies, illustrating how and why specific metrics have been used.
Professor of Finance at London Business School
Alex Edmans, Professor of Finance at London Business School and Academic Director of the Centre for Corporate Governance, who focuses on corporate governance, responsible business, and behavioural finance. He is also an elected member of the Governing Body. Alex graduated from Oxford University and then worked for Morgan Stanley in investment banking (London) and fixed income sales and trading (New York). After a PhD in Finance from MIT Sloan as a Fulbright Scholar, he joined Wharton in 2007 and was tenured in 2013 shortly before moving to LBS.