Better Business Cases Foundation — Questions and Answers

Question 1: Which of the following should an executive summary of a business case include?

Complete risk registers and mitigation plans
The problem, proposed solution, key benefits, costs, and recommendation (Correct answer)
Full stakeholder interview transcripts
Detailed appendices and supporting data tables

Correct answer: The problem, proposed solution, key benefits, costs, and recommendation

An executive summary should include the key elements a senior leader needs: the problem, proposed solution, expected benefits, estimated costs, and a clear recommendation.

Question 2: In a business case, the 'do nothing' scenario is included primarily to:

Satisfy a regulatory requirement
Reduce the scope of analysis
Justify skipping the project
Show the cost of inaction and establish a baseline (Correct answer)

Correct answer: Show the cost of inaction and establish a baseline

The 'do nothing' baseline quantifies what happens if the organization takes no action, making the case for change more compelling.

Question 3: An effective business case recommendation section should:

Focus only on non-financial factors
Present all options equally without a clear preference
State a specific preferred option with a clear rationale (Correct answer)
Delegate the decision entirely to the reader

Correct answer: State a specific preferred option with a clear rationale

Decision-makers expect the author to commit to a recommendation supported by the analysis, rather than leaving the choice entirely open.

Question 4: A 'phased implementation approach' in a business case is recommended when:

Risk is high or organizational capacity to absorb change is limited (Correct answer)
Only one vendor is available
The project has no dependencies
The budget is unlimited

Correct answer: Risk is high or organizational capacity to absorb change is limited

Phasing allows the organization to manage risk, demonstrate early wins, and adjust based on lessons learned before full deployment.

Question 5: In US public sector cost-benefit analyses, the social discount rate used by federal agencies is typically determined by:

The Federal Reserve
The CBO baseline rate
OMB Circular A-94 guidelines (Correct answer)
Individual agency discretion only

Correct answer: OMB Circular A-94 guidelines

OMB Circular A-94 specifies the discount rates federal agencies must use when conducting economic analyses for regulatory and program decisions.

Question 6: Which risk is described as an unknown risk that cannot be identified in advance?

Residual risk
Known-known
Unknown-unknown (Correct answer)
Known-unknown

Correct answer: Unknown-unknown

Unknown-unknowns are risks that cannot be anticipated because they fall outside current knowledge or experience.

Question 7: Which qualitative risk analysis tool plots risks on a grid by likelihood and impact?

SWOT analysis
Probability-Impact Matrix (Correct answer)
Pareto chart
Gantt chart

Correct answer: Probability-Impact Matrix

A Probability-Impact Matrix visually maps risks based on how likely they are and how severe their consequences would be.

Question 8: When presenting multiple solution options in a business case, what should each option include?

A single financial metric for comparison
Costs, benefits, risks, and a recommendation rationale (Correct answer)
The option the author prefers with no alternatives
Only benefits, to maintain a positive tone

Correct answer: Costs, benefits, risks, and a recommendation rationale

Each option must be evaluated consistently across costs, benefits, and risks so decision-makers can make an informed choice.

Question 9: Which element should appear FIRST in a business case executive summary?

Recommended solution
Financial projections
Problem statement or business opportunity (Correct answer)
Implementation timeline

Correct answer: Problem statement or business opportunity

The problem statement or business opportunity comes first to establish context and justify why the business case exists before presenting any solution.

Question 10: What tone is most appropriate for an executive summary in a business case?

Clear, concise, and professional with an action-oriented focus (Correct answer)
Technical and detailed with industry jargon
Conversational and informal
Neutral and descriptive without any recommendations

Correct answer: Clear, concise, and professional with an action-oriented focus

Executive summaries should be written in a clear, professional, and action-oriented tone that facilitates quick decision-making by senior leaders.

Question 11: A business case with an IRR greater than the company's cost of capital should generally be:

Deferred indefinitely
Reviewed by external auditors
Rejected
Accepted (Correct answer)

Correct answer: Accepted

When IRR exceeds the cost of capital (hurdle rate), the project generates more return than its financing cost and should be accepted.

Question 12: The executive summary of a business case is primarily written for:

External auditors
Database administrators
Technical implementation teams
Senior decision-makers with limited reading time (Correct answer)

Correct answer: Senior decision-makers with limited reading time

The executive summary distills the key findings and recommendation so that busy senior leaders can quickly grasp the business case without reading the full document.

Question 13: In business case risk analysis, 'expected monetary value' (EMV) is calculated as:

Total project budget divided by number of risks
Net Present Value minus sunk costs
Probability of risk × monetary impact of risk (Correct answer)
Sum of all project costs

Correct answer: Probability of risk × monetary impact of risk

EMV quantifies risk in dollar terms by multiplying the probability of a risk event by its financial impact, enabling direct comparison of risks.

Question 14: A 'two-page brief' version of a business case is most useful for:

Regulatory compliance filings
Full technical review sessions
Detailed vendor negotiations
Initial executive buy-in or quick leadership alignment (Correct answer)

Correct answer: Initial executive buy-in or quick leadership alignment

A concise two-page brief allows executives to quickly assess the opportunity and provide early direction before a full business case is developed.

Question 15: How does the executive summary differ from the business case introduction?

They serve the same purpose and can be used interchangeably
The introduction explains the document's purpose and structure, while the executive summary distills the entire case including conclusions and recommendations (Correct answer)
The executive summary is less important than the introduction
The introduction provides financial data while the executive summary provides only qualitative data

Correct answer: The introduction explains the document's purpose and structure, while the executive summary distills the entire case including conclusions and recommendations

The introduction orients readers to the document's structure, while the executive summary provides a standalone distillation of the entire business case including its conclusions and recommendations.

Question 16: How should risk information be addressed in an executive summary?

Discuss only opportunities to maintain a positive, persuasive tone
Briefly highlight the top risks and state how they will be mitigated (Correct answer)
Risk should never be mentioned as it may cause the proposal to be rejected
Include the full risk register with all identified risks and probability scores

Correct answer: Briefly highlight the top risks and state how they will be mitigated

Briefly noting key risks and their mitigations demonstrates credibility and thoroughness without burdening the executive summary with excessive risk detail.

Question 17: When should a business case CBA use 'real' prices (excluding inflation) rather than 'nominal' prices?

When comparing costs and benefits that span multiple years with significant inflation (Correct answer)
When the analysis period is less than one year
When the discount rate is set to zero
Only for government projects

Correct answer: When comparing costs and benefits that span multiple years with significant inflation

For multi-year analyses, using real prices and a real discount rate maintains consistency and avoids distortion from inflation assumptions.

Question 18: In business case writing, 'change management implications' are typically addressed to:

List regulatory changes
Outline budget amendments
Document IT system changes only
Describe how the organization will adapt and what support is needed (Correct answer)

Correct answer: Describe how the organization will adapt and what support is needed

Change management in a business case outlines how people, processes, and culture will be managed during and after implementation.

Question 19: A 'sensitivity table' in a business case CBA displays how the NPV changes when:

The vendor changes pricing
Two key variables are simultaneously varied (Correct answer)
Stakeholders are added to the project
The project scope is reduced

Correct answer: Two key variables are simultaneously varied

A sensitivity (or data) table shows NPV outcomes across a matrix of two key variable ranges, revealing which combinations produce positive or negative results.

Question 20: Which section of a business case typically documents the assumptions made and their associated risks?

Assumptions and constraints section (Correct answer)
Project timeline
Vendor evaluation matrix
Financial appendix only

Correct answer: Assumptions and constraints section

The assumptions and constraints section lists what the business case takes as true for planning purposes and flags which assumptions carry the most risk if wrong.

Question 21: When two mutually exclusive projects are compared in a business case, the correct decision rule is to:

Select the lowest-cost option
Choose the project with the higher NPV (Correct answer)
Always choose the one with the higher IRR
Pick the one with the shorter payback period

Correct answer: Choose the project with the higher NPV

For mutually exclusive projects, NPV is the superior criterion because it measures absolute value creation, whereas IRR can be misleading when project sizes differ.

Question 22: A project charter differs from a business case in that the project charter:

Contains the financial analysis
Is written before the problem statement
Replaces the need for stakeholder analysis
Formally authorizes the project to begin after approval of the business case (Correct answer)

Correct answer: Formally authorizes the project to begin after approval of the business case

The business case justifies the investment, while the project charter formally authorizes the project manager to proceed with resources once the business case is approved.

Question 23: In a business case CBA, 'externalities' are costs or benefits that:

Are always negative
Are internal to the organization only
Apply only to government projects
Fall on parties outside the direct transaction (Correct answer)

Correct answer: Fall on parties outside the direct transaction

Externalities are third-party impacts not captured in market prices, such as environmental pollution (negative) or community job creation (positive).

Question 24: What is the primary purpose of an executive summary in a business case?

To list all stakeholders involved in the project
To provide a detailed technical analysis of the proposed solution
To document the project's implementation timeline in detail
To give decision-makers a concise overview of the business case's key points (Correct answer)

Correct answer: To give decision-makers a concise overview of the business case's key points

The executive summary gives busy decision-makers a quick, high-level overview of the entire business case without requiring them to read the full document.

Question 25: When should a business case typically be revised after initial approval?

Never, as changes undermine the original commitment
Only when the project is completed
Only upon request from the project sponsor
When significant changes in scope, cost, or assumptions occur during execution (Correct answer)

Correct answer: When significant changes in scope, cost, or assumptions occur during execution

Business cases are living documents that should be updated when material changes occur, ensuring decisions remain grounded in current information.

Question 26: Which term describes the minimum rate of return a business case must achieve to be approved?

Benchmark rate
Ceiling rate
Hurdle rate (Correct answer)
Floor rate

Correct answer: Hurdle rate

The hurdle rate is the minimum acceptable rate of return set by the organization, often based on WACC plus a risk premium.

Question 27: In US business cases for regulated industries, which risk category requires specific regulatory compliance documentation?

Compliance risk (Correct answer)
Market risk
Operational risk
Reputational risk

Correct answer: Compliance risk

Compliance risk involves the potential for legal penalties or sanctions due to failure to adhere to laws, regulations, or internal policies.

Question 28: What is 'signposting' in the context of writing an executive summary?

Including a table of contents within the executive summary
Adding footnotes to reference supporting data sources
Highlighting key sections with colored text or bold graphics
Using transitional phrases that guide the reader through the document's logical structure (Correct answer)

Correct answer: Using transitional phrases that guide the reader through the document's logical structure

Signposting uses transitional phrases and clear structural cues to guide readers through the summary's logic, making the argument easier to follow.

Question 29: In a business case, NPV stands for:

Net Performance Value
Net Profit Value
Nominal Project Value
Net Present Value (Correct answer)

Correct answer: Net Present Value

NPV (Net Present Value) is the difference between the present value of cash inflows and outflows over a period of time.

Question 30: A sensitivity analysis in a business case is used to:

Determine project timelines
Identify sensitive stakeholders
Measure employee morale impact
Test how changes in key variables affect the outcome (Correct answer)

Correct answer: Test how changes in key variables affect the outcome

Sensitivity analysis varies key inputs (costs, revenue, adoption rates) to show how the business case conclusion changes under different scenarios.

Question 31: Which discount rate is most commonly used in public sector business cases to calculate Net Present Value?

A government-specified social discount rate (Correct answer)
The internal hurdle rate set by the CFO
The prime lending rate set by the central bank
The organization's weighted average cost of capital (WACC)

Correct answer: A government-specified social discount rate

Public sector bodies (e.g., using HM Treasury or OMB guidance) apply a mandated social discount rate to reflect societal time preference.

Question 32: A business case financial model should use 'real' (inflation-adjusted) cash flows when the discount rate is:

A risk-free rate
The federal funds rate
A nominal rate
A real (inflation-excluded) rate (Correct answer)

Correct answer: A real (inflation-excluded) rate

For consistency, real cash flows must be paired with a real discount rate; mixing nominal and real values produces incorrect NPV results.

Question 33: A business case presented to a board of directors should differ from one presented to an operational manager primarily in:

The number of risk factors listed
The accuracy of the financial data included
Whether a recommended option is included
The level of detail — board-level cases focus on strategic impact and high-level financials, while operational cases include implementation specifics (Correct answer)

Correct answer: The level of detail — board-level cases focus on strategic impact and high-level financials, while operational cases include implementation specifics

Different audiences need different levels of detail; boards need strategic and financial context while operational managers need execution-level information.

Question 34: In a cost-benefit analysis (CBA), the 'discount rate' is used to:

Calculate employee bonuses
Negotiate vendor discounts
Convert future costs and benefits to present-day values (Correct answer)
Determine marketing budgets

Correct answer: Convert future costs and benefits to present-day values

The discount rate reflects the time value of money — a dollar received in the future is worth less than a dollar today, and the discount rate quantifies this difference.

Question 35: Which best describes the key difference between an executive summary and an abstract?

An abstract includes financial recommendations while an executive summary does not
They are identical documents used interchangeably
An abstract is longer and more detailed than an executive summary
An executive summary can stand alone as a decision-making document, while an abstract merely describes the content (Correct answer)

Correct answer: An executive summary can stand alone as a decision-making document, while an abstract merely describes the content

Unlike an abstract that simply describes what a document contains, an executive summary is self-contained and provides enough information for a decision-maker to act without reading the full document.

Question 36: When a business case includes a communication plan, it typically specifies:

Audience, message, frequency, and channel for each stakeholder group (Correct answer)
Employee salary information
Legal disclaimers only
Vendor contract terms

Correct answer: Audience, message, frequency, and channel for each stakeholder group

A communication plan maps out what information each stakeholder group needs, how often, and through which channels.

Question 37: Which writing principle is most important when crafting the recommendation in a business case?

Include all technical details to demonstrate thoroughness
Defer the decision to avoid accountability
Be direct and clearly state the preferred option with supporting rationale (Correct answer)
Use passive voice to appear objective

Correct answer: Be direct and clearly state the preferred option with supporting rationale

A strong recommendation clearly states the preferred course of action and briefly explains why it is the best choice given the evidence.

Question 38: When facing resistance from a key stakeholder, a business case writer should first:

Rewrite the entire business case from scratch
Escalate immediately to the CEO
Seek to understand the root cause of the resistance (Correct answer)
Remove the stakeholder from the review list

Correct answer: Seek to understand the root cause of the resistance

Understanding the root cause of resistance allows the writer to address legitimate concerns or correct misunderstandings before escalating.

Question 39: When a business case is described as 'evidence-based,' it means the justification relies on:

Data, research, and documented facts rather than opinion alone (Correct answer)
The personal authority of the project sponsor
Precedents set by competitor organizations
Internal political support from key departments

Correct answer: Data, research, and documented facts rather than opinion alone

An evidence-based business case uses verifiable data and research to support its claims, making it more credible and defensible.

Question 40: Why is it important to clearly state the business case's review and approval process?

To comply with IT security requirements
To list all team members alphabetically
To calculate project costs accurately
To ensure the right people are involved at the right time to make timely decisions (Correct answer)

Correct answer: To ensure the right people are involved at the right time to make timely decisions

A defined review and approval process prevents delays, clarifies who must sign off, and ensures governance requirements are met.

Question 41: How should financial information be presented in a business case executive summary?

Financial information should not appear in an executive summary
With full spreadsheet breakdowns and detailed formulas
As high-level figures such as total investment, expected ROI, and payback period (Correct answer)
Only as percentages without absolute dollar amounts

Correct answer: As high-level figures such as total investment, expected ROI, and payback period

Financial information in an executive summary should be presented at a high level — total costs, expected returns, and key metrics — not with granular spreadsheet detail.

Question 42: When documenting assumptions in a business case, what is the recommended best practice?

Limit assumptions to financial figures only
Only include favorable assumptions
Keep assumptions implicit to avoid scrutiny
List assumptions with their potential impact if wrong (Correct answer)

Correct answer: List assumptions with their potential impact if wrong

Explicit assumptions with stated impacts allow stakeholders to assess risk and validate the case's reliability.

Question 43: Which section of a business case explicitly identifies who has final approval authority?

Risk register
Sensitivity analysis
Governance and decision-making section (Correct answer)
Financial appendix

Correct answer: Governance and decision-making section

The governance section defines decision rights, escalation paths, and who holds final approval authority for the proposed investment.

Question 44: Where should the executive summary be positioned within the business case document?

At the end, after all analysis is presented
Its position has no impact on how it is received
As a separate document submitted independently
At the beginning, before the main body (Correct answer)

Correct answer: At the beginning, before the main body

The executive summary appears at the beginning of the business case so decision-makers can immediately grasp key points before choosing to read detailed sections.

Question 45: Which statement about the relationship between a business case and a project charter is most accurate?

The business case is created after the project charter to document outcomes
The business case justifies why the project should be done; the project charter authorizes it and defines how it will be governed (Correct answer)
The project charter replaces the business case once approved
They are the same document with different names

Correct answer: The business case justifies why the project should be done; the project charter authorizes it and defines how it will be governed

The business case provides the justification, while the project charter is the formal authorization document that triggers project governance.

Question 46: Which discount rate is most commonly used in US corporate business cases to reflect the minimum acceptable return?

Prime lending rate
Federal funds rate
Treasury bill rate
Weighted Average Cost of Capital (WACC) (Correct answer)

Correct answer: Weighted Average Cost of Capital (WACC)

WACC reflects the blended cost of a company's debt and equity financing and is the standard hurdle rate for US corporate business cases.

Question 47: Which technique helps a business case writer uncover hidden stakeholder concerns before final submission?

Using only quantitative data
Conducting pre-submission stakeholder interviews (Correct answer)
Submitting anonymously
Skipping the review cycle

Correct answer: Conducting pre-submission stakeholder interviews

Pre-submission interviews allow the writer to surface and address concerns before the formal review, increasing the likelihood of approval.

Question 48: Which of the following best illustrates the 'strategic alignment' section of a business case?

A breakdown of vendor pricing options
A list of project team members and their qualifications
A statement showing how the proposal supports the organization's stated goal of expanding into new markets (Correct answer)
A Gantt chart showing the project timeline

Correct answer: A statement showing how the proposal supports the organization's stated goal of expanding into new markets

Strategic alignment demonstrates that the proposed initiative directly supports the organization's goals, increasing its chance of approval.

Question 49: Which ratio compares a project's net benefits to its costs, with a value greater than 1 indicating a worthwhile investment?

Benefit-Cost Ratio (BCR) (Correct answer)
Debt-to-equity ratio
Return on Investment ratio
Price-earnings ratio

Correct answer: Benefit-Cost Ratio (BCR)

A Benefit-Cost Ratio (BCR) above 1.0 means benefits exceed costs, signaling that the investment creates value.

Question 50: Which financial metric measures the time required to recover the initial investment from net cash inflows?

Net Present Value
Internal Rate of Return
Return on Equity
Payback Period (Correct answer)

Correct answer: Payback Period

The payback period calculates how long it takes for cumulative net cash inflows to equal the initial investment outlay.

Question 51: A business case for a technology upgrade should include a 'current state' analysis primarily to:

Establish the problem baseline and demonstrate why change is needed (Correct answer)
Document historical IT spending
Provide a technical specification for vendors
Justify the IT department's budget request

Correct answer: Establish the problem baseline and demonstrate why change is needed

The current state analysis shows existing pain points and inefficiencies, making the case for why the proposed change is necessary.

Better Business Cases Foundation

Tests knowledge of HM Treasury's Five Case Model for developing effective business cases in public and private sector organisations, covering strategic, economic, commercial, financial, and management cases.

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40 min

Time Limit

50%

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