Mixed Deck — All Financial Management for Project Managers Topics Flashcards
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Read the first 20 Mixed Deck — All Financial Management for Project Managers Topics flashcards as text
What is the risk of having a very high accounts payable balance relative to project expenses?
Answer: It may indicate liquidity problems or an inability to pay obligations
An unusually high AP balance can signal that the project lacks cash to pay vendors, which may damage vendor relationships and project continuity.
A project manager notices that cash outflows are consistently occurring two weeks before the corresponding cash inflows. Which technique best addresses this timing gap?
Answer: Accelerating accounts receivable collection
Accelerating accounts receivable collection shortens the gap between when work is performed and when payment is received, directly reducing timing mismatches.
A project used $180,000 in actual costs but planned to spend $200,000 for the same period. The EV for work completed is $160,000. Which statement correctly describes performance?
Answer: The project is both behind schedule and over budget
SV = EV - PV = $160K - $200K = -$40K (behind schedule); CV = EV - AC = $160K - $180K = -$20K (over budget).
Working capital requirements for a new project should be treated in capital budgeting as:
Answer: An initial cash outflow recovered at project end
Net working capital needed at project start is a cash outflow that is typically recovered (reversed) at the end of the project's life.
Which of the subsequent use CCD technology?
Answer: Video camera readers
CCD (Charge-Coupled Device) technology is a core component in digital imaging, including video cameras. Video camera readers, often utilized for tasks like barcode scanning or optical character recognition, employ CCD sensors to convert light into digital data. This enables them to capture and interpret visual information efficiently.
Which ratio would a project manager use to assess how efficiently a project converts assets into revenue?
Answer: Asset turnover ratio
Asset turnover ratio = Revenue / Total Assets, measuring efficiency of asset use in generating revenue.
Which performance reporting technique compares actual results to a rolling forecast rather than a fixed baseline?
Answer: Forecast variance analysis
Forecast variance analysis measures actual performance against a continuously updated forecast rather than the original plan.
An opportunity cost in capital budgeting represents:
Answer: The benefit foregone by choosing one investment over another
Opportunity cost is the value of the next best alternative forgone when a capital allocation decision is made.
A project manager is reviewing a cash flow waterfall diagram. What does this diagram primarily illustrate?
Answer: The sequence in which different stakeholders receive payments from project revenues
A cash flow waterfall diagram shows the priority order in which cash flows are distributed to different stakeholders (e.g., senior lenders first, then mezzanine, then equity), common in project finance structures.
Which of the following best describes a factoring arrangement in accounts receivable?
Answer: Selling receivables to a third party at a discount to receive immediate cash
Factoring involves selling accounts receivable to a factor (third party) at a discount in exchange for immediate liquidity.
team that reviews a schedule to identify overdue invoices and collects unpaid balances on accounts
Answer: collections team
A collections team is specifically responsible for managing and recovering outstanding debts from customers. Their primary function involves reviewing accounts for overdue payments, contacting clients, and implementing strategies to collect unpaid balances. This directly aligns with identifying overdue invoices and collecting unpaid balances on accounts.
When project management reserves are used for unknown-unknown risks, who typically has authority to approve their release?
Answer: Senior management or the sponsor
Management reserves for unknown risks are controlled above the project manager level, requiring senior management or sponsor approval.
Which of the following is a limitation of the Payback Period method?
Answer: It ignores the time value of money
The traditional Payback Period does not discount future cash flows, so it ignores the time value of money.
The balanced scorecard is utilized because...
Answer: To determine what the business finds important to ensure it reaches its goals.
The balanced scorecard is a strategic performance management framework used to identify and track key performance indicators (KPIs) across multiple perspectives. Its purpose is to translate an organization's vision and strategy into a comprehensive set of measurable objectives, ensuring that the business focuses on what is truly important for achieving its long-term goals.
What can be monitored by a non-profit organization using a balanced scorecard?
Answer: Supporters
While profit is a key metric for for-profit businesses, non-profit organizations use a balanced scorecard to monitor different, mission-critical aspects. For a non-profit, 'supporters' (donors, volunteers, beneficiaries) are crucial stakeholders, and metrics related to their engagement, satisfaction, and contribution would be vital to track for achieving the organization's mission and ensuring sustainability.
Which accounting principle requires that revenues be recognized when earned, regardless of when cash is received?
Answer: Accrual accounting principle
The accrual accounting principle recognizes revenue when it is earned and expenses when incurred, not when cash changes hands.
A project manager is evaluating two payment timing scenarios: Option A collects $100,000 in 30 days; Option B collects $100,000 in 90 days. Assuming a cost of capital of 12% annually, approximately how much more valuable is Option A?
Answer: $2,000
The 60-day difference at 12% annually (1% per month) on $100,000 is approximately $100,000 × 0.01 × 2 = $2,000, making Option A more valuable by roughly that amount.
In decision tree analysis, the 'decision node' (square) represents:
Answer: A choice the project team must make among alternatives
Square nodes in a decision tree represent decision points where the team selects among available options.
is employed to identify the items on the purchase order that were really received.
Answer: receiving report
A receiving report is a document generated upon the arrival of goods, detailing the items received, their quantities, and condition. It is crucial for verifying that the goods delivered match the purchase order, ensuring accuracy in inventory records and facilitating proper payment to suppliers. This report acts as proof of delivery and quality control.
A warehouse uses cross-docking for certain product lines. Which inventory cost is most significantly reduced by this approach?
Answer: Holding costs
Cross-docking transfers goods directly from inbound to outbound without storage, virtually eliminating holding costs for those items.