Financial Management & Budgeting Flashcards

A client's account shows a 15% budget variance in Q2. What is the account manager's FIRST priority?

Answer: Analyze root causes before proposing corrective actions

Root cause analysis must precede corrective action to ensure the right solution is applied.

Which budgeting method builds a new budget from zero each period rather than adjusting prior-year figures?

Answer: Zero-based budgeting

Zero-based budgeting requires justifying every expense from scratch each cycle regardless of prior budgets.

An account manager tracks ROI for a client initiative. The project cost $50,000 and generated $80,000 in revenue. What is the ROI?

Answer: 60%

ROI = (Net Profit / Cost) × 100 = ($30,000 / $50,000) × 100 = 60%.

What does 'accounts receivable days' (DSO) indicate for a client's financial health?

Answer: The average number of days to collect payment after a sale

Days Sales Outstanding (DSO) measures how long on average it takes to collect receivables after a sale.

A client requests a budget increase mid-year citing unforeseen market changes. The account manager should:

Answer: Evaluate the business case, impact, and available funding before deciding

Mid-year budget amendments require a structured business case review to justify reallocation of resources.

Which financial metric best measures whether a company can meet its short-term obligations?

Answer: Current ratio

The current ratio (current assets ÷ current liabilities) measures short-term liquidity.

When preparing an account budget, what is the primary purpose of including a contingency reserve?

Answer: To cover unexpected costs without requiring a formal budget amendment

A contingency reserve absorbs unanticipated costs and preserves budget integrity without requiring re-approval cycles.