Advanced Performance Management Flashcards
6 cards from real ACCA SP practice questions. Tap to flip, then mark Knew It or Still Learning — missed cards come back until you master them.
Read the first 6 Advanced Performance Management flashcards as text
Which of the following best describes the 'performance prism'?
Answer: A stakeholder-centred performance framework with five facets: stakeholder satisfaction, strategies, processes, capabilities and stakeholder contribution
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.
Which of the following is a criticism of traditional financial performance measures?
Answer: They are lagging indicators that reflect past decisions and do not drive future value creation
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.
Economic Value Added (EVA) is calculated as:
Answer: Net operating profit after tax (NOPAT) minus (Capital employed × WACC)
EVA = NOPAT − (Capital employed × WACC). A positive EVA means the business earns more than its cost of capital, creating shareholder value.
In the context of transfer pricing for multinational companies, 'arm's length pricing' refers to:
Answer: A price that reflects what unrelated parties would agree in a free market transaction
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.
A 'reward management' system is most likely to be effective when:
Answer: Rewards are clearly linked to the performance indicators used in the performance management system
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.
Which of the following is a feature of 'beyond budgeting'?
Answer: Replacing annual budgets with rolling forecasts and relative performance targets, empowering front-line managers
Beyond budgeting (Hope & Fraser) replaces fixed annual budgets with adaptive processes (rolling forecasts, relative targets), decentralising decision-making to improve responsiveness and reduce gaming.