Financial Management for Project Managers Financial Ratio 3

Question 1

A project manager calculates a gross profit margin of 40% on revenue of $250,000. What is the gross profit?

Accepted Answer

$100,000

Answer

Gross Profit = Gross Profit Margin × Revenue = 0.40 × $250,000 = $100,000.

Question 2

Which financial ratio is most useful for comparing the profitability of projects with different scales?

Accepted Answer

Return on investment (ROI)

Answer

ROI is expressed as a percentage, allowing fair comparison across projects of different sizes.

Question 3

A project has accounts receivable of $60,000 and annual credit sales of $360,000. What is the receivables turnover ratio?

Accepted Answer

6.0

Answer

Receivables Turnover = Annual Credit Sales / Accounts Receivable = $360,000 / $60,000 = 6.0.

Question 4

If a project's days sales outstanding (DSO) is 45 days, what does this indicate?

Accepted Answer

The project collects receivables in 45 days on average

Answer

DSO measures the average number of days it takes to collect payment after a sale is made.

Question 5

A project manager compares two projects: Project A has an ROI of 18% and Project B has an ROI of 22%. Which statement is most accurate?

Accepted Answer

Project B is more cost-efficient per dollar invested

Answer

A higher ROI means Project B generates more return per dollar invested, indicating greater investment efficiency.

Financial Management for Project Managers Practice Test