Business Case Writing Business Case Writing 2 — Questions and Answers
Question 1: Which financial metric shows the time required for an investment to generate enough returns to recover its initial cost?
- Net Present Value (NPV)
- Internal Rate of Return (IRR)
- Payback Period (Correct answer)
- Return on Equity (ROE)
Correct answer: Payback Period
Payback period measures how long it takes for cumulative cash flows to equal the initial investment outlay.
Question 2: In a business case, the 'do nothing' scenario is included primarily to:
- Justify skipping the project
- Show the cost of inaction and establish a baseline (Correct answer)
- Reduce the scope of analysis
- Satisfy a regulatory requirement
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: When documenting assumptions in a business case, what is the recommended best practice?
- Keep assumptions implicit to avoid scrutiny
- List assumptions with their potential impact if wrong (Correct answer)
- Only include favorable assumptions
- Limit assumptions to financial figures only
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 4: A sensitivity analysis in a business case is used to:
- Test how changes in key variables affect the outcome (Correct answer)
- Identify sensitive stakeholders
- Measure employee morale impact
- Determine project timelines
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 5: Which section of a business case typically includes a SWOT or PESTLE analysis?
- Financial Summary
- Strategic Context / Situation Analysis (Correct answer)
- Project Timeline
- Risk Register
Correct answer: Strategic Context / Situation Analysis
The strategic context section uses tools like SWOT or PESTLE to frame the external and internal environment driving the need for the business case.
Question 6: Which of the following best describes a 'soft benefit' in a business case?
- A benefit that is easily quantified in dollar terms
- A benefit that improves employee morale but is difficult to monetize (Correct answer)
- A benefit realized in the first quarter of implementation
- A benefit guaranteed by contract
Correct answer: A benefit that improves employee morale but is difficult to monetize
Soft benefits like improved morale, brand reputation, or customer satisfaction are real but hard to express as precise financial figures.
Question 7: In a business case, what is the purpose of a cost-benefit analysis (CBA)?
- To list all project tasks in order of cost
- To compare total expected costs against total expected benefits to assess viability (Correct answer)
- To allocate budget across departments
- To identify the cheapest solution option
Correct answer: To compare total expected costs against total expected benefits to assess viability
A CBA systematically compares projected costs and benefits to help decision-makers determine whether an initiative is financially justified.
Business Case Writing Business Case Writing 2
Which financial metric shows the time required for an investment to generate enough returns to recover its initial cost?