PCM PCM Financial Management & Reporting 1

Question 1

Which financial metric measures the percentage of total outstanding debt that a collection agency successfully recovers within a given period?

Accepted Answer

Recovery rate

Answer

Recovery rate measures the percentage of outstanding debt successfully collected and is a primary KPI for collection managers.

Question 2

A collection manager reviewing the agency's P&L statement notices that cost per collected dollar has increased by 15% quarter-over-quarter. What is the MOST likely first step?

Accepted Answer

Analyze operational expense line items to identify cost drivers

Answer

Analyzing expense line items identifies which cost drivers are responsible before taking corrective action.

Question 3

Which budgeting approach requires each department to justify all expenditures from scratch each budget cycle rather than basing the new budget on prior-year figures?

Accepted Answer

Zero-based budgeting

Answer

Zero-based budgeting requires all expenses to be justified anew each cycle, eliminating automatic carryover of prior spending.

Question 4

A collection agency's Days Sales Outstanding (DSO) increased from 45 to 62 days. What does this indicate?

Accepted Answer

Clients are paying invoices more slowly or the collection cycle has lengthened

Answer

A rising DSO indicates it is taking longer on average to collect payment, signaling slower cash inflows or portfolio deterioration.

Question 5

In collection agency financial reporting, which statement shows the agency's cash inflows from collections, operating expenses paid, and net cash position over a period?

Accepted Answer

Cash flow statement

Answer

The cash flow statement tracks actual cash inflows and outflows during the period, including collections received and expenses paid.

PCM - Professional Collection Manager Certified Practice Test

PCM - Professional Collection Manager Certified Practice Test

PCM PCM Financial Management & Reporting 1