Practice Test Geeks(CSM) Certified Software Manager Practice Test
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Financial Management & Budgeting Flashcards

7 cards from real CSM practice questions. Tap to flip, then mark Knew It or Still Learning — missed cards come back until you master them.

Read the first 7 Financial Management & Budgeting flashcards as text

  1. Which budgeting technique requires every expense to be justified from scratch each budget cycle, regardless of previous allocations?

    Answer: Zero-based budgeting

    Zero-based budgeting starts from a 'zero base' each period, requiring managers to justify all expenditures anew rather than adjusting prior-year figures.

  2. A software manager is preparing a capital expenditure request for a new development tool costing $200,000 with a 5-year useful life. Using straight-line depreciation, what is the annual depreciation expense?

    Answer: $40,000

    Straight-line depreciation divides the asset cost by useful life: $200,000 ÷ 5 years = $40,000 per year.

  3. In software project financial management, the term 'contingency reserve' refers to:

    Answer: Budget allocated to handle known-unknown risks identified during planning

    Contingency reserves cover identified risks with quantified probability and impact, distinguishing them from management reserves which cover unknown risks.

  4. A software organization compares the discounted cash inflows to the initial investment of a project. When the NPV equals zero, the discount rate used is called the:

    Answer: Internal Rate of Return (IRR)

    The IRR is the discount rate that makes the NPV of all cash flows equal to zero, representing the project's expected rate of return.

  5. Which cost classification would software license renewal fees MOST likely fall under in a project budget?

    Answer: Operating expenditure (OpEx)

    Recurring license renewal fees are operating expenditures because they are ongoing costs of running the business rather than investments in long-term assets.

  6. A software manager discovers that $500,000 has already been spent on a failing project. When deciding whether to continue, this $500,000 should be treated as:

    Answer: A sunk cost that should not influence the go-forward decision

    Sunk costs are past expenditures that cannot be recovered and should be excluded from forward-looking investment decisions to avoid escalation of commitment.

  7. In rolling-wave planning for a multi-year software program, near-term work packages are budgeted in detail while future phases use what type of estimate?

    Answer: Rough order of magnitude (ROM) estimates

    Rolling-wave planning uses detailed estimates for imminent work and rough order of magnitude (typically ±50%) estimates for work that is not yet well-defined.