Question Three
This question requested a discussion and evaluation of the use of value-based approaches to performance management at a chain of gift shops (LOL).
Requirement (a) requested an explanation of value-based management (VBM) and how it aids management focus.Candidates often scored a pass but not full marks on this part.There were often lengthy and irrelevant discussions about non-financial factors which suggest incomplete knowledge of VBM.www.examw.com
Requirement (b) asked for an evaluation of LOL’s performance using EVA,EPS growth and the share price.It was also typically passed but few candidates scored 9 or more out of 12.The assessment of the numerical work was often lacking.Candidates infrequently compared the change in share price of LOL to the market and sector performance-which demonstrated that the company was doing well in a falling market.Some candidates could not perform the EVA computation which was surprising as this is a key performance measure and the scenario offered few of the possible technical adjustments.Having performed the calculation of EVA,a significant minority then failed to note that it was positive choosing to focus on the fact that it had fallen from the previous year.This again showed weak understanding of such a key concept.
Requirement (c) was the most difficult part of the question and was generally poorly done,probably as a result of the failure to explain VBM which was illustrated in part (a).