PGM Financial Management 2

Question 1

A program manager is evaluating two initiatives. Initiative A has an NPV of $500,000 and Initiative B has an NPV of $750,000. All else being equal, which should be prioritized and why?

Accepted Answer

Initiative B, because higher NPV indicates greater expected value creation

Answer

Initiative A, because lower NPV indicates lower risk

Answer

Initiative A, because it will likely cost less to implement

Answer

Neither, because NPV alone is insufficient for decision-making in programs

Question 2

What does the term 'management reserve' refer to in program financial management?

Accepted Answer

An amount added to the cost baseline to handle unknown unknowns

Answer

Funds withheld by the CFO for corporate emergencies

Answer

Budget set aside for known risks identified in the risk register

Answer

The contingency fund allocated to individual project managers

Question 3

Which financial analysis technique calculates the time required for a program investment to generate enough returns to recover the initial investment cost?

Accepted Answer

Payback Period

Answer

Return on Investment (ROI)

Answer

Net Present Value (NPV)

Answer

Internal Rate of Return (IRR)

Question 4

A program manager discovers a $200,000 cost variance at the end of Q2. What is the MOST appropriate first step?

Accepted Answer

Analyze the root cause of the variance before deciding on corrective action

Answer

Immediately escalate to the executive sponsor for additional funding

Answer

Issue a change request to increase the budget baseline

Answer

Reduce the scope of lower-priority program components

Question 5

In program financial management, what is the key difference between a contingency reserve and a management reserve?

Accepted Answer

Contingency reserve is for known risks; management reserve is for unknown risks

Answer

Management reserve is for known risks; contingency reserve is for unknown risks

Answer

Contingency reserve requires board approval; management reserve does not

Answer

There is no practical difference — both terms are interchangeable

Question 6

Which financial document provides a time-phased representation of the approved program budget, used as the baseline against which actual expenditures are measured?

Accepted Answer

Cost performance baseline

Answer

Program business case

Answer

Budget forecast report

Answer

Funding requirements schedule

Question 7

A program manager is reporting financial status to the governance board and the program's SPI is 0.92 and CPI is 1.05. What does this combination indicate?

Accepted Answer

The program is behind schedule but under budget

Answer

The program is behind schedule and over budget

Answer

The program is ahead of schedule and under budget

Answer

The program is ahead of schedule but over budget