ExpertEasy2 marksMultiple Choice
ACCA · Question 01 · Financial Management Function
A global wildlife conservation NGO, 'FaunaProtect', is evaluating its financial management objectives. Unlike a commercial entity, FaunaProtect does not aim to maximize shareholder wealth.
Which of the following best describes the primary financial management objective for FaunaProtect?
A global wildlife conservation NGO, 'FaunaProtect', is evaluating its financial management objectives. Unlike a commercial entity, FaunaProtect does not aim to maximize shareholder wealth.
Which of the following best describes the primary financial management objective for FaunaProtect?
Answer options:
A.
To maximize the annual surplus of donations over operating expenditures.
B.
To achieve value for money by balancing economy, efficiency, and effectiveness in its conservation programs.
C.
To maximize the market value of the NGO's restricted endowment funds.
D.
To minimize the cost of capital associated with donor funding.
How to approach this question
Recall the primary objectives of Not-For-Profit (NFP) organizations. They focus on the 3 Es: Economy, Efficiency, and Effectiveness.
Full Answer
B.To achieve value for money by balancing economy, efficiency, and effectiveness in its conservation programs.✓ Correct
Not-for-profit organizations, such as NGOs, do not have shareholders and therefore do not aim to maximize shareholder wealth. Instead, their primary financial objective is to achieve 'Value for Money', which is assessed using the three Es: Economy (spending less), Efficiency (spending well), and Effectiveness (spending wisely to achieve outcomes).
Common mistakes
Students often confuse maximizing surplus with the primary objective, but NGOs are meant to spend their funds on their mission, not hoard them.
Practice the full ACCA FM — Financial Management Practice Exam 3
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