Measuring Financial Performance
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 is Professor of Finance at London Business School. Alex has a PhD from MIT as a Fulbright Scholar, and was previously a tenured professor at Wharton and an investment banker at Morgan Stanley. Alex has spoken at the World Economic Forum in Davos and given the TED talk “What to Trust in a Post-Truth World” and the TEDx talk “The Social Responsibility of Business”. Alex’s book, “Grow the Pie: How Great Companies Deliver Both Purpose and Profit”, was a Financial Times Book of the Year for 2020.