CHAPTER 1What Is Performance and Benchmarking?
THE BASIC ISSUE: HAS YOUR WEALTH INCREASED?
If we receive a $5,000 bonus check because we sold more widgets than our competitors did, we can either spend the money now or we can defer spending it now and let it grow in an investment. Say we had invested our $5,000 in a certificate of deposit (CD) and our account grew to $5,050 over a period of three months. We earned $50 on a $5,000 investment or 1 percent over three months, or about 4 percent per year on our investment. If we think that the $50 earned on a $5,000 investment is not a reasonable return, then we might be inclined to spend $5,000 and not invest it or look for an alternative higher-paying investment.
To make investment choices we must ...