ACCA Applied Skills · Financial Reporting · Not-for-profit and public sector entities
A charity measures its performance using value for money. Which set of measures correctly describes the three elements of value for money?
Value for money consists of economy, efficiency and effectiveness. Economy is about obtaining inputs at low cost, efficiency is the relationship between inputs and outputs, and effectiveness is whether outputs achieve the organisation's objectives.
- AEconomy, efficiency and effectivenessCorrect
- BEquity, efficiency and earnings
- CEconomy, expansion and effectiveness
- DEffectiveness, earnings and expenditure
Explanation
Value for money is assessed through the three Es: economy (minimising cost of inputs), efficiency (maximising outputs per input) and effectiveness (achieving the intended outcomes). The other options include terms that are not part of the standard framework.
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