Financial Analysis Flashcards

A diversity mentoring program costs $80,000 and produces $200,000 in measurable benefits. What is its ROI?

Answer: 150%

ROI = (Benefits − Costs) / Costs = ($200,000 − $80,000) / $80,000 = 150%.

Which cost is generally the hardest to quantify when building a business case on turnover of underrepresented employees?

Answer: Lost institutional knowledge and team productivity

Lost knowledge and productivity are indirect costs that need estimates, unlike direct invoiced expenses.

In a pay equity regression, which variable should be excluded from the legitimate pay factors because it could carry bias forward?

Answer: Prior salary history

Prior salary can carry past discrimination into new pay, and many U.S. states and cities ban salary history inquiries.

A DEI training initiative has fixed costs of $50,000 and saves $10,000 per year. What is the simple payback period?

Answer: 5 years

Payback period = Initial investment / Annual savings = $50,000 / $10,000 = 5 years.

Which financial metric accounts for the time value of money when evaluating a multi-year diversity investment?

Answer: Net present value (NPV)

NPV discounts future cash flows back to today's dollars using a discount rate.

When an ERG budget is planned by justifying every expense from scratch each cycle rather than adjusting the previous year's amount, this is called:

Answer: Zero-based budgeting

Zero-based budgeting starts at zero and requires every line item to be justified each period.

Comparing a diversity program's actual spending to its approved budget and explaining the differences is known as:

Answer: Variance analysis

Variance analysis looks at the gap between budgeted and actual figures and why it happened.