Business Case Writing Financial Analysis in Business Cases 3

Question 1

Which ratio compares a project's net benefits to its costs, with a value greater than 1 indicating a worthwhile investment?

Accepted Answer

Benefit-Cost Ratio (BCR)

Answer

Return on Investment ratio

Answer

Debt-to-equity ratio

Answer

Price-earnings ratio

Question 2

In business case writing, 'opportunity cost' refers to:

Accepted Answer

The value of the next best alternative foregone

Answer

The cost of office space

Answer

Marketing expenses

Answer

Employee training costs

Question 3

Monte Carlo simulation is used in advanced business case analysis to:

Accepted Answer

Model probability distributions of financial outcomes

Answer

Create project timelines

Answer

Write executive summaries

Answer

Select vendors

Question 4

Which term describes the minimum rate of return a business case must achieve to be approved?

Accepted Answer

Hurdle rate

Answer

Ceiling rate

Answer

Floor rate

Answer

Benchmark rate

Question 5

Depreciation is typically included in a business case because it:

Accepted Answer

Provides tax shield benefits that reduce effective costs

Answer

Represents an actual cash outflow

Answer

Increases the project's NPV directly

Answer

Is required by OSHA regulations

Question 6

When two mutually exclusive projects are compared in a business case, the correct decision rule is to:

Accepted Answer

Choose the project with the higher NPV

Answer

Always choose the one with the higher IRR

Answer

Pick the one with the shorter payback period

Answer

Select the lowest-cost option