Financial performance is calculated by analyzing the investment that was made and the profit that was obtained after a certain time.
The notion of performance is linked to the proportion between the resources used to achieve something and the result that is later obtained. In this way, performance is associated with profit or utility . Financial, on the other hand, is what is related to finances (money, capital or flow).
Financial performance , therefore, is the profit that a certain operation allows to obtain. It is a calculation that is made taking the investment made and the profit generated after a certain period.
In other words, financial performance relates the profit achieved to the resources used . Let's take the case of a person who has a fixed term in a bank. This guy deposits $1,000 for a fixed term that will expire in 90 days . After that period, you get $1,200 ; That is, he received $200 in interest. The financial performance of its fixed term, ultimately, was 20% .
The financial performance statement
To all of the above we must add the existence of what is known as a financial performance statement . It is a term that is used within the business field to refer to the accounting summary that is carried out in an entity in terms of net income and expenses.
It is worth knowing other information of interest, such as the following:
-It is also called the income statement or profit statement.
-It can be presented once a month, quarterly or once a year.
-It becomes a very useful tool for the owners or senior managers of a company, since it is the material that allows them to perfectly know the main items of expenses and income on which the result obtained by the company will depend. a certain period.
-In the same way, by being able to know the profitability of a company, it becomes a useful instrument when it comes to getting new investors who may be encouraged to put their money in if they see that it is high or, at least, interesting.
-The expenses that must be recorded in the aforementioned statement of financial performance must include everything from those related to losses to those related to interest, costs of sales...
-In the income section, it is important and necessary that sales income, interest income, income obtained from profits on investments that have been made...
Financial performance is associated with the profit achieved thanks to an operation.
Risk and predictability
Bond operations also allow you to obtain a certain financial return. A businessman may have purchased, in 2014 , bonds for a total of 50,000 pesos . These bonds matured in 2018 . When the date arrived, the person exchanged the bonds for $80,000 pesos . For this businessman, the operation provided a financial return of 60% .
Financial performance is often associated with risk and predictability. The return offered by a fixed term is usually lower than that offered by shares, since it is an investment that offers greater security.