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In the following question, I want to confirm whether the correct answer is statement number 2. Also I am somewhat confused as to why the second statement is correct. How can the degree of government regulation be factored into the financial statements to make the comparison fairer between the two sectors?
Question: Which of the following statements, relating to performance measurement are true?
1) External data are never required to assess the performance of an organisation.
2) The degree of government regulation should be considered when comparing performance of public sector and private sector organisations.
3) Financial performance indicators are only relevant to private sector organisations.
The correct answer is indeed (2).
‘Considering it’ is not saying to factor it in – there is no standard way of factoring it and it may not be possible anyway. It is simply that it needs thinking about when trying to draw any conclusions from various ratios etc..