Investment Income Performance


The term investment income performance is used to describe a measure that allows analysts to understand the overall rate of return on a company’s investment activities. This metric can be used to determine the effectiveness of the assets appearing as long and short term investments on the balance sheet.


Investment Income Performance (%) = ((Dividend Income + Interest Income) / (Investments)) x 100


  • Dividend and Interest Income are recorded on an accrual basis to eliminate the effects of timing differences.
  • Investments include the total of all long and short-term income-producing accounts and securities such as money market funds, as well as stocks and bonds of other companies.


Operating performance measures allow the investor-analyst to understand how well a company is performing with respect to sales, margins, and profits.  One of the ways to measure the effectiveness of a company’s investment portfolio is by calculating their investment income performance.  This measure takes all of the income derived from stocks and bonds of other companies, in addition to money market accounts, and divides this value by the total of the company’s long and short term investments.

To remove the effects of a timing difference, the dividend and interest income values should be stated on an accrual basis.  That is to say, this is the money earned in the current period, even if the funds have not yet been received due to a timing difference.

It should be noted that many companies will invest excess funds in relatively safe securities, which would also provide low yields.  Abnormally high rates of return suggest a company is taking a risky approach to their investments.  In addition to examining the investment income performance of a company, the investor-analyst should also investigate the ratings of these securities.


Company A’s balance sheet indicates they had several million dollars of assets tied up in long and short term investments.  The notes to Company A’s balance sheet and income statement provides the following insights into sources of non-operating income.

  Investment Income
Bonds $2,500,000 $112,500
Common Stock $1,875,000 $65,600
Money Market Funds $625,000 $9,375
U.S. Treasury Bills $175,000 $5,250
Total $5,175,000 $192,725

From the above information, the investor-analyst was able to calculate Company A’s investment income performance as:

= ($192,725 / $5,175,000) x 100, or 3.72%

This value was subsequently compared to other organizations in the same industry to see if Company A’s performance was lower or higher than its peers.

Related Terms

goodwill to assets ratio, overhead to cost of sales, revenue margin of safety, revenue break-even point, gross profit index, operating income to sales, operating profit margin