ACCA Performance Management (F5) Certification Practice Exam

What does efficiency measure link in performance management?

1. Input with overall costs

2. Input with output

3. Revenue with expenses

4. Profit with capital investment

The correct answer is: Input with output

Efficiency measures the relationship between input and output in performance management, indicating how effectively resources are utilized to produce goods or services. This concept emphasizes maximizing outputs while minimizing inputs, providing insight into operational performance and resource allocation. When evaluating efficiency, organizations analyze how much input—such as labor, materials, and time—is required to generate a certain level of output. A higher efficiency ratio signifies that an organization is producing more output with a given amount of input, leading to improved productivity and lower per-unit costs. Other options, while relevant to various aspects of performance management, do not capture the direct relationship between the resources consumed (input) and the goods or services produced (output) as effectively as this correct choice. Understanding this fundamental link is crucial for strategic decision-making and operational improvements in any business context.