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 does 'Variance at Completion' (VAC) measure in project financial forecasting?
Answer: The difference between the original budget and the forecasted total cost at project end
VAC = BAC - EAC; a negative VAC indicates the project is forecasted to finish over budget, while a positive VAC indicates it will finish under budget.
What is 'Management Reserve' in project financial planning?
Answer: Budget set aside by senior management for unforeseen scope changes or unknown risks beyond the project manager's control
Management reserve is held outside the project cost baseline and is used for unknown, unplanned events; it requires authorization from senior management to access.
When should a project manager revise the financial forecast?
Answer: Whenever significant variances occur, milestones are completed, or new information changes cost assumptions
Forecasts should be updated regularly and whenever material changes occur—such as cost variances, scope changes, or new risk events—to keep the financial picture accurate.
Which qualitative forecasting technique uses structured expert input and iterative surveys to build financial consensus?
Answer: Delphi technique
The Delphi technique gathers input anonymously from a panel of experts across multiple rounds, converging toward a consensus estimate without the bias of face-to-face group dynamics.
A project financial forecast shows a projected overrun of 25% at completion. What is the project manager's FIRST recommended action?
Answer: Analyze the root causes of the overrun and present corrective action options to stakeholders
Before taking corrective action, the project manager must identify why the overrun is occurring and evaluate realistic options so stakeholders can make informed decisions.
What is the primary advantage of using parametric estimating in project financial forecasting?
Answer: It provides quick, scalable estimates by applying statistical relationships between project variables and costs
Parametric estimating uses historical data and statistical relationships (e.g., cost per unit or cost per square foot) to generate fast, scalable estimates that can be applied across varying project sizes.
Which financial planning practice helps a project manager identify the point at which cumulative project costs will be recovered by cumulative project revenues?
Answer: Break-even analysis
Break-even analysis identifies the output level or time point at which total project costs equal total revenues, providing insight into when the project becomes financially self-sustaining.