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ACCA Applied Skills · Performance Management · Performance analysis in private sector, public sector and not-for-profit organisations

Which of the following is a common advantage of using non-financial performance indicators alongside financial ones?

Non-financial indicators can act as early warning signals of problems that will later damage financial results, for example rising complaints or defect rates. They are not always objective, still need targets, and cannot normally be added together because they are not measured in money.

  1. AThey can give early signs of problems that will later affect financial resultsCorrect
  2. BThey are always easier to quantify objectively than financial measures
  3. CThey remove the need to set targets for managers
  4. DThey are all expressed in a common monetary unit so can be added together

Explanation

Non-financial indicators such as customer complaints or defect rates are often leading indicators, signalling issues before profit is affected. They are not always objective, still need targets, and are generally not in a common monetary unit, so the other options are wrong.

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