ACCA Strategic Business Reporting (SBR) Practice Exam

What does relevant financial information provide to users in decision-making?

1. Historical value

2. Predictive and confirmatory value

3. Exclusively financial performance

4. Comparative market analysis

The correct answer is: Predictive and confirmatory value

Relevant financial information plays a crucial role in decision-making by offering both predictive and confirmatory value to users. Predictive value refers to the information's ability to help users anticipate future outcomes based on past performance and current trends. This assists stakeholders in assessing potential risks and opportunities. Confirmatory value, on the other hand, helps users validate or revise their past evaluations and decisions by providing insights that corroborate or challenge previous assumptions. This dual function of providing a forward-looking perspective while also reflecting on historical data makes such information indispensable for management, investors, creditors, and other stakeholders when making informed economic decisions. It enables them to draw conclusions about the entity's financial health and operational efficiency, aiding in strategic planning and resource allocation. Other options might focus on specific aspects of financial data, but they do not encapsulate the holistic nature of what relevant financial information provides in supporting comprehensive decision-making processes.