ACCA Performance Management (F5) Certification Practice Exam

Which of the following is NOT a problem associated with financial performance indicators?

1. Short-termism

2. Manipulation of results

3. Increased transparency

4. Do not convey the full picture

The correct answer is: Increased transparency

In the context of financial performance indicators, increased transparency is typically viewed as a positive outcome rather than a problem. Financial performance indicators are intended to provide clarity and insight into an organization's financial health and operational efficiency. When financial data is transparent, stakeholders—including management, investors, and regulators—can make more informed decisions based on reliable and accessible information. In contrast, short-termism refers to a focus on short-term financial results at the expense of long-term stability or growth, manipulation of results involves unethical practices such as accounting fraud or creative accounting to present a more favorable financial position than actually exists, and the idea that financial indicators do not convey the full picture highlights their limitations in capturing non-financial factors and broader strategic considerations. Thus, increased transparency stands out as a trait that enhances the usefulness of performance indicators, rather than a drawback.