Financial Management for Project Managers Cash Flow Management 2

Question 1

A project manager notices that cash outflows are consistently occurring two weeks before the corresponding cash inflows. Which technique best addresses this timing gap?

Accepted Answer

Accelerating accounts receivable collection

Answer

Increasing the project contingency reserve

Answer

Delaying vendor contract execution

Answer

Reducing the project scope

Question 2

Which of the following best describes the 'J-curve effect' commonly seen in project cash flows?

Accepted Answer

Initial negative cash outflows are followed by positive returns in later phases

Answer

Cash flows start positive then turn negative mid-project

Answer

Cash flows remain flat then spike at project close

Answer

Inflows and outflows alternate evenly throughout the project lifecycle

Question 3

A project manager is using milestone-based billing. What is the primary cash flow risk of this approach?

Accepted Answer

Delays in milestone achievement defer cash inflows

Answer

Overpayment to vendors

Answer

Inability to track actual costs

Answer

Excessive billing disputes with stakeholders

Question 4

When calculating net cash flow for a project period, which formula is correct?

Accepted Answer

Net Cash Flow = Cash Inflows − Cash Outflows

Answer

Net Cash Flow = Total Revenue − Total Expenses

Answer

Net Cash Flow = Net Income + Depreciation

Answer

Net Cash Flow = Earned Value − Actual Cost

Question 5

A project has a cumulative cash flow of −$200,000 at month 6 and is expected to reach breakeven at month 14. What does the area below the zero line on the cash flow curve represent?

Accepted Answer

The maximum financing or working capital requirement

Answer

The project's total sunk cost

Answer

The net present value of the project

Answer

The earned value at project midpoint

Question 6

Which contract type gives a project manager the greatest visibility into and control over subcontractor cash outflows?

Accepted Answer

Cost-plus with open-book accounting

Answer

Lump-sum fixed-price contract

Answer

Time-and-materials contract

Answer

Unit-price contract

Question 7

A project manager wants to defer $150,000 in non-critical equipment purchases from Q3 to Q4 to preserve liquidity. Which cash flow management practice does this represent?

Accepted Answer

Cash flow smoothing through expenditure deferral

Answer

Scope reduction to cut project costs

Answer

Value engineering to reduce total cost

Answer

Cost baseline rebaselining

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