ACCA SP Advanced Performance Management

Question 1

Which of the following best describes the 'performance prism'?

Accepted Answer

A stakeholder-centred performance framework with five facets: stakeholder satisfaction, strategies, processes, capabilities and stakeholder contribution

Answer

The performance prism (Neely et al.) starts with stakeholders, identifying what they want (satisfaction) and what they can provide (contribution), then aligns strategies, processes and capabilities accordingly.

Question 2

Which of the following is a criticism of traditional financial performance measures?

Accepted Answer

They are lagging indicators that reflect past decisions and do not drive future value creation

Answer

Traditional financial measures (e.g., EPS, ROCE) are backward-looking lagging indicators; they report historical outcomes rather than leading indicators of future performance and value drivers.

Question 3

Economic Value Added (EVA) is calculated as:

Accepted Answer

Net operating profit after tax (NOPAT) minus (Capital employed × WACC)

Answer

EVA = NOPAT − (Capital employed × WACC). A positive EVA means the business earns more than its cost of capital, creating shareholder value.

Question 4

In the context of transfer pricing for multinational companies, 'arm's length pricing' refers to:

Accepted Answer

A price that reflects what unrelated parties would agree in a free market transaction

Answer

The arm's length principle (OECD guidelines) requires that transactions between related parties be priced as if they were between independent parties in comparable circumstances, to prevent tax base erosion.

Question 5

A 'reward management' system is most likely to be effective when:

Accepted Answer

Rewards are clearly linked to the performance indicators used in the performance management system

Answer

For performance management to work, rewards must be clearly aligned with the organisation's key performance measures, motivating the desired behaviours and creating goal congruence.

ACCA Strategic Professional Practice Test

ACCA Strategic Professional Practice Test

ACCA SP Advanced Performance Management