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A performance measure is said to be contaminated when it does not represent the true and complete picture of a process. The term has been used in the context of metrics that are based on sampling, which is often an imperfect way of representing reality. For example, there might be many factors that influence a company’s revenue but only one metric – such as net income – may be reported. This would lead to misleading information for investors about what makes up this important figure. Investors need to pay attention to how their companies report these figures if they want accurate data and make informed decisions about investments.

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It has been noted that the one metric may not be an accurate representation of a company’s performance. For example, if there are many factors that influence revenue but only net income is reported then investors would have misleading information about what makes up this important figure. Investors need to pay attention to how their companies report these figures if they want accurate data and make informed decisions about investments. This post includes content from “A Contaminated Performance Measure” by The Economist on October 14th, 2018

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