The performance of the firm can be measured by its financial results, i.e by its size of earnings riskiness and profitability are two major factors which jointly determine the value of the concern.
Financial decisions which increase risk will decrease the value of the firm and on the other hand, financial decisions which increase the profitability will increase value of the firm.
Financial performance is a subjective measure of how well a firm can use assets form its primary mode of business and generate revenues. The term is also used a general measure of firm’s overall financial healthy over a given period.