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Module A, Paper DA2 (project)
Incorporating subject areas:

• Interpretation of Financial Statements
• Performance Management.

General comments

The overall performance of candidates was good, although there was a fall in the number of candidates who scored very high marks. Perhaps the prime reason for this was the tendency for comments to be quite general. Even where such answers are correct, there is a limit to the number of marks which can be awarded as the context is of particular importance.

It is worth repeating a comment from my report on the June 2003 project: 'It is important to note that in future sittings, the project will continue to require candidates to consider the context which is provided.' Once again, the context was provided by considering a specific company. The supplement booklet gave information on strategy and goals. This provided the context in which performance could be discussed. Some candidates sought to provide a context by assessing performance by comparison with a competitor. While this is valuable, even such a comparative exercise must consider whether the strategies of two companies are similar.

Context was also important in the questions relating to performance management. Only a few candidates discussed the issues of decentralisation, planning and budgeting in the context of the new business. Once again, this was a missed opportunity to obtain marks.

Question 1

Those candidates who scored good marks did so because they placed their analysis in context, rather than simply calculating ratios and commenting on the results. To do this they first considered what the company was seeking to achieve by examining the stated strategy, and then selected ratios which would help to assess whether or not this had been delivered.

In contrast, those candidates who did not score highly simply calculated and discussed a number of ratios. It is fair to say that such unstructured answers presented more ratios than those answers which attracted high marks. This is a logical result of failing to consider the context, as more ratios are presented to convey the impression that an in-depth analysis has been carried out.

Another feature of answers which did not attract high marks was the tendency of candidates to make vague comments about the results of the ratios, with no analysis. Too often when I mark such answers, I ask myself 'why do you think that has happened?' When assessing performance, candidates are required to do more than recognise that the current ratio has increased or decreased. At this level it is necessary to suggest possible reasons, based on the information which is provided.

A further aspect of the context is that too many candidates assessed performance against arbitrary benchmarks. An example of this is the statement that the current ratio should be greater than 2:1. Such a comment is of little value, as the acceptable level for the current ratio will depend on the nature of the business and the policies which are being implemented by management.

Question 2

There were many particularly good answers to this question. Such answers demonstrated an awareness of the importance of considering the specific company, and discussed decentralisation and planning as it applied to the fictitious new company.

Those candidates who did not score good marks tended, once again, to present a general discussion, with no reference to the new company. This meant that although the consideration of issues relating to decentralisation and planning covered relevant theory, the marks that could be awarded were limited because the theory was not applied to the specific company. This was particularly evident in the discussion on planning and budgeting, where very few candidates discussed those issues which would be influential in how Newflight ought to carry out its planning and budgeting.

The lack of clarity and context also meant that some candidates did not pick up as many marks as they could have when discussing the goals and measures which the investors should focus on. While it may seem self-evident that an airline should seek to run flights on time, this comment needs to be developed. First, it requires the (perhaps obvious) statement that this is likely to be a priority for passengers. While this may seem self-evident, candidates are reminded that marks can only be awarded for points which they record in their answer. Markers cannot assume the reason why a candidate makes a particular comment. Therefore it is important to ensure that a full explanation is provided, even if this seems to be stating the obvious.

What may be less obvious is the need to develop the comment by explaining how the objective of having flights on time will be measured. There are at least two points which are relevant here. The first is to decide whether the definition of 'on-time' means that the latest time which is acceptable is the published time. The second is whether 'flights on time' is to be measured at the point of departure, or point of arrival.

These comments are specific examples of how answers can be easily developed to obtain more marks. The general point is that, when suggesting measures of performance, candidates should ensure that two points are clear. First, why is this goal relevant for this business and second, how will the goal actually be measured. If these points are not made, yet another opportunity to gain marks is missed.

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