CHAPTER 9: Overview of Financial Performance Concept in Organisations

Abstract

Performance is the function of the ability of an organization to gain and manage the resources in several different ways to develop competitive advantage (Chen & Wong, 2004). There are two kinds of performance, financial performance and non-financial performance. Financial performance emphasizes on variables related directly to financial report. Company’s performance is evaluated in three dimensions. The first dimension is company’s productivity, or processing inputs into outputs efficiently. The second is profitability dimension, or the level of which company’s earnings are bigger than its costs.

The third dimension is market premium, or the level of which company’s market value is exceeding its book value (Walker, 2001). Performance is a difficult concept, in terms of both definition and measurement. It has been defined as the result of activity, and the appropriate measure selected to assess corporate performance is considered to depend on the type of organization to be evaluated, and the objectives to be achieved through that evaluation.