MAF651 CHAPTER 3

Which of the following is a disadvantage of using conventional financial performance measures (FPM) in performance management systems ?

• They provide excellent predictive power for future events

• They offer a holistic view including customer satisfaction and innovation

• They may encourage actions that reduce customer and shareholder value

• They focus primarily on strategic objectives and long-term goals

Which of the following is not a commonly used financial performance measure?

• Return on Investment (ROI)

• Residual Income (RI)

• Customer Satisfaction Index (CSI)

• Economic Value Added (EVA)

Why are non-financial performance measures (NFM) considered important in a performance management system?

• They offer insight into intangible assets and long-term strategies

• They replace the need for any financial analysis

• They are purely subjective and used for personal assessments

• They are easier to calculate than financial measures

Which of the following is an example of a non-financial measure used for evaluating customer satisfaction?

• Return on Assets

• Residual Income

• Net Profit Margin

• Conversion Rate

What is one major limitation of using only financial performance measures in operational control?

• They are always accurate and timely

• They measure causes of problems, not consequences

• They lack predictive power for future performance

• They are not influenced by accounting policies
  

What is one way non-financial measures help reduce earnings management?

• By eliminating financial reports

• By replacing strategic goals with short-term targets

• By ensuring financial results are published quarterly

• By not relying solely on financial data for performance assessment
  

Which of the following best illustrates a non-financial performance measure in the "Learning and Growth" category?

• Return on Investment

• Product defect percentage

• Multi-skilling of employees

• Operating profit margin

Why might conventional financial performance measures fail to guide future actions effectively?

• Because they are too detailed and specific

• Because they focus only on the long-term strategy

• Because they emphasize only immediate financial outcomes

• Because they are rarely based on accounting policies
  

Which of the following best explains why non-financial measures are important for strategic alignment?

• They are based solely on numerical profit outcomes

• They reflect the company's vision and mission better than financial data

• They reduce the need for operational metrics

• They eliminate the influence of external market factors

Which of the following is an operational non-financial measure related to product quality?

• Return on Equity

• Net present value

• Residual Income

• Product defect percentage