Nowadays, firms operate in turbulent environments facing numerous challenges exposing their operations to various risks. Thus, the authors wanted to find out the key factors that are important in explaining firm performance considering the risks of the underlying business. The analysis is conducted using the sample of Croatian largest manufacturers that were active in the 2018–2021 period. Sharpe ratio, i.e., risk-adjusted return that takes into account profitability, its variability as well as risk-free rate, is employed as a dependent variable. Furthermore, firm-specific variables such as firm size based on total revenues, capitalization, liquidity presented with the current ratio, earnings before interest and taxes (EBIT) to sales ratio as well as publicly traded dummy served as independent variables. The conducted regression analysis revealed the significant determinants of risk-adjusted returns. Specifically, firm size, capitalization, liquidity, and EBIT-to-sales ratio positively affect the risk-adjusted returns of Croatian large and medium-sized manufacturers. Moreover, the publicly traded dummy also proved to be statistically significant in explaining firm performance whereas it takes a negative sign. These findings are robust to the modified measure of risk-adjusted return.