Financial Management for Project Managers Accounts Payable/Receivable 4

Question 1

A project manager is reviewing cash flow and notices a large gap between invoiced revenue and collected revenue. Which accounts receivable metric best explains this gap?

Accepted Answer

Days sales outstanding (DSO)

Answer

Gross profit margin

Answer

Return on investment

Answer

Cost performance index

Question 2

Which of the following best describes a factoring arrangement in accounts receivable?

Accepted Answer

Selling receivables to a third party at a discount to receive immediate cash

Answer

Issuing bonds secured by project receivables

Answer

Allowing customers to pay in installments

Answer

Transferring payables to a sister company

Question 3

What is the risk of having a very high accounts payable balance relative to project expenses?

Accepted Answer

It may indicate liquidity problems or an inability to pay obligations

Answer

It signals excellent vendor relationships

Answer

It reduces the project's need for a contingency reserve

Answer

It improves the project's credit rating

Question 4

A project manager receives an invoice from a subcontractor that exceeds the approved PO by 12%. What is the correct course of action?

Accepted Answer

Process a change order to authorize the additional amount before approving payment

Answer

Pay the invoice in full to maintain vendor relations

Answer

Reject the invoice entirely and terminate the subcontractor

Answer

Split the difference and pay 6% over the PO amount

Question 5

Which of the following best describes the difference between cash basis and accrual basis accounting for project receivables?

Accepted Answer

Accrual basis records revenue when earned; cash basis records it when cash is received

Answer

Cash basis records revenue when earned; accrual basis records it when cash is received

Answer

Both methods record revenue at the same time

Answer

Cash basis is only used for government projects

Question 6

A project manager wants to assess whether the project can meet its short-term obligations to vendors. Which ratio is most relevant?

Accepted Answer

Current ratio

Answer

Return on equity

Answer

Debt-to-equity ratio

Answer

Internal rate of return

Question 7

What does a negative accounts payable balance typically indicate in project accounting?

Accepted Answer

The project has overpaid a vendor or a duplicate payment has occurred

Answer

Vendors owe the project money for services rendered

Answer

The project has no outstanding vendor invoices

Answer

The project's budget has been exceeded