Financial Planning and Forecasting Flashcards
7 cards from real Financial Management for Project Managers 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 Planning and Forecasting flashcards as text
What is the primary purpose of a project financial forecast?
Answer: To predict future financial performance and resource needs over the project lifecycle
A financial forecast projects future costs, revenues, and resource needs so project managers can anticipate and address financial gaps before they become problems.
Which forecasting method aggregates cost estimates from individual work packages up to the total project level?
Answer: Bottom-up forecasting
Bottom-up forecasting builds the overall project financial plan by summing detailed estimates from each work package, providing high accuracy at the cost of more time and effort.
What does 'Estimate at Completion' (EAC) represent in project financial planning?
Answer: The forecasted total cost of the project when all work is finished
EAC is the expected total cost of the project at completion, typically calculated as actual costs to date plus the estimate to complete the remaining work.
A project manager is updating the financial forecast at the midpoint of a project. Which input is MOST critical to an accurate forecast?
Answer: Actual cost data and revised estimates for remaining work
Accurate actual cost data combined with realistic estimates for remaining work are the essential inputs to a reliable updated financial forecast.
What is a rolling financial forecast in project management?
Answer: A continuously updated forecast that extends the planning horizon as time progresses
A rolling forecast is regularly revised to cover a consistent future period, dropping past periods and adding new ones as the project advances, keeping the financial outlook current.
Which of the following best describes the difference between a project budget and a project financial forecast?
Answer: A budget is the approved spending plan; a forecast is a dynamic prediction of expected costs
The budget is the approved cost baseline, while the forecast is a regularly updated prediction of what the project will actually cost based on current information and performance trends.
When creating a project financial plan, what is the FIRST step a project manager should typically take?
Answer: Define the scope and work breakdown structure (WBS) to establish what must be funded
Before estimating or planning finances, the scope and WBS must be defined so that all work is identified and no costs are overlooked or double-counted.