Question 31 was a ‘traditional’ performance assessment question requiring candidates to discuss the financial and non-financial performance of a business.

The scenario gave information about the business, along with any key changes or decisions made by the business over the period.

Financial information was given, along with pertinent non-financial statistics.

The key with these questions is to identify cause and effect relationships. Marks will be awarded for explaining WHY something has changed, along with how it might affect other aspects of the business.

Marks are split between calculation and discussion on these questions – the split is usually given in the requirement, and weighted towards the discussion.

However, in order to make a meaningful point, calculations are essential.

Many candidates were able to pick up a high percentage of the calculation marks available through knowledge of performance measures such as gross and net profit margin. In a question of this type, percentage change is a key measure of performance.

It is worth noting that percentage change will be awarded marks, absolute change will not.

The reason for this is that the statement “Revenue has increased by $10m” doesn’t tell me anything about the business’ performance. Is $10m a large change, or insignificant? If last year’s revenue was $50m, a $10m increase (20%) would seem significant. If the prior year revenue was $1,000m, this change is not nearly so impressive (1%).

When it comes to the discussion, use the calculations to guide you to the key areas to focus on. If administrative expenses have increased by 0.2%, don’t waste any time worrying about why – it’s not significant. Use the scenario and any non-financial information you might have to help explain the performance.

If, for example, revenue has increased by 10%, see why that might be. Does the scenario mention average industry growth? If this was 20% then a 10% growth in revenue actually represents a poor performance and a loss in market share. Making these points will add value (and marks!) to your answer.

A large reduction in staff training costs (for example) will boost profit margins, but you may find that non-financial performance may suffer (customer complaints, time to provide service).

The most common mistake made by candidates was not applying the above. Most candidates were comfortable calculating percentage movement, but added no value to their calculations. Points such as “Cost of sales have decreased by 18%. This is a good performance.” were common, but apart from the calculation scored no marks.

Answers which looked into why cost of sales might have decreased, or what impact that might have had, scored many more marks. In this case, the decrease in cost of sales could partly be put down to a fall in revenue, but the main point is that the scenario explains how the company changed to a cheaper supplier – this would have a direct effect on their cost of sales.

Even better answers would discuss how the rise in customer complaints may have been caused by the poor quality of these supplies.

Another common error was to offer the business advice. The requirement clearly stated “discuss the performance,” and marks could not be given for advice. It is really important to read the requirement carefully and answer the question being asked.

Having said all of this, many candidates scored highly by backing up their calculations with sensible commentary, and using the information in the scenario to add weight to their discussion.