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AP Financial Management & Budgeting Flashcards

6 cards from real AP practice questions. Tap to flip, then mark Knew It or Still Learning — missed cards come back until you master them.

Read the first 6 AP Financial Management & Budgeting flashcards as text

  1. Which budgeting approach requires each department to justify all expenditures from scratch each period?

    Answer: Zero-based budgeting

    Zero-based budgeting requires every expense to be re-justified for each new period, starting from zero.

  2. What is the primary purpose of a cash flow forecast in AP financial management?

    Answer: To predict future cash availability and potential shortfalls

    A cash flow forecast helps organizations anticipate future cash needs and identify potential funding gaps before they occur.

  3. A variance report shows actual spending is $15,000 over a $50,000 budget. What is the variance percentage?

    Answer: 30%

    Variance percentage is calculated as (variance / budgeted amount) × 100 = (15,000 / 50,000) × 100 = 30%.

  4. Which financial ratio measures a company's ability to pay short-term obligations using its most liquid assets?

    Answer: Quick ratio

    The quick ratio (acid-test ratio) measures ability to meet short-term liabilities using assets that can be quickly converted to cash.

  5. In AP financial planning, what does the term 'encumbrance' refer to?

    Answer: Funds reserved for a committed but not yet paid expense

    An encumbrance is a reservation of budget funds for a purchase order or contract that has been committed but not yet invoiced or paid.

  6. Which type of cost remains constant regardless of production volume within a relevant range?

    Answer: Fixed cost

    Fixed costs, such as rent or salaries, do not change with changes in production or service volume within a defined relevant range.