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Chapter 16

2.5 Problems with financial measures

Achievement of these target ratios (financial performance indicators) may be linked
to a reward system in order to motivate managers to improve financial performance.

However, there are a number of problems associated with the use of financial
performance indicators alone to monitor performance:

 Short-termism vs long term performance

 Manipulation of results

 Do not convey the full picture

 Backward looking.

Therefore, when monitoring performance, a broader range of measures should be
used.

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