Financial Management for Project Managers Financial Planning and Forecasting 3

Question 1

What does 'Variance at Completion' (VAC) measure in project financial forecasting?

Accepted Answer

The difference between the original budget and the forecasted total cost at project end

Answer

The difference between scheduled and actual project finish dates

Answer

The cumulative cost variance recorded to date

Answer

The percentage of contingency reserve remaining

Question 2

What is 'Management Reserve' in project financial planning?

Accepted Answer

Budget set aside by senior management for unforeseen scope changes or unknown risks beyond the project manager's control

Answer

Funds held by the project manager for discretionary spending

Answer

A reserve fund used to cover contractor overruns

Answer

The portion of contingency reserve not yet allocated to specific risks

Question 3

When should a project manager revise the financial forecast?

Accepted Answer

Whenever significant variances occur, milestones are completed, or new information changes cost assumptions

Answer

Only at the end of each fiscal year

Answer

Only when the sponsor requests an updated report

Answer

Once per project phase, regardless of performance trends

Question 4

Which qualitative forecasting technique uses structured expert input and iterative surveys to build financial consensus?

Accepted Answer

Delphi technique

Answer

Monte Carlo simulation

Answer

Parametric modeling

Answer

Trend extrapolation

Question 5

A project financial forecast shows a projected overrun of 25% at completion. What is the project manager's FIRST recommended action?

Accepted Answer

Analyze the root causes of the overrun and present corrective action options to stakeholders

Answer

Request the full management reserve immediately

Answer

Reduce the project scope to bring costs in line without informing sponsors

Answer

Extend the project schedule to spread costs over a longer period

Question 6

What is the primary advantage of using parametric estimating in project financial forecasting?

Accepted Answer

It provides quick, scalable estimates by applying statistical relationships between project variables and costs

Answer

It requires no historical data and relies entirely on team judgment

Answer

It guarantees accuracy within 5% of actual costs

Answer

It eliminates the need for a work breakdown structure

Question 7

Which financial planning practice helps a project manager identify the point at which cumulative project costs will be recovered by cumulative project revenues?

Accepted Answer

Break-even analysis

Answer

Net Present Value (NPV) analysis

Answer

Payback period calculation

Answer

Variance analysis