Project Management Basics

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Questions and Answers

What is the primary purpose of a business case in project management?

  • To set out the advantages and parameters of the project (correct)
  • To assign tasks to project team members
  • To outline the risks involved in a project
  • To perform a detailed project schedule analysis

Who is responsible for producing the business case?

  • The client or the director of the client organization (correct)
  • The stakeholders involved in the project
  • The project team members
  • The project manager

Why is requirements management critical to project success?

  • It reduces the overall project budget significantly
  • It focuses on identifying and managing what is needed in a project (correct)
  • It speeds up the project completion process
  • It eliminates the need for stakeholder engagement

Which role does a project sponsor NOT typically play?

<p>Manage the day-to-day operations of the project (D)</p> Signup and view all the answers

What is the primary purpose of documenting a reporting matrix in project management?

<p>To log specific project requirements (B)</p> Signup and view all the answers

What aspect of project requirements does a project manager prioritize?

<p>Viability or desirability of requirements (D)</p> Signup and view all the answers

What happens to costs and timelines when project requirements change?

<p>They can be impacted by changes to requirements (B)</p> Signup and view all the answers

Which of the following characteristics is NOT examined during the testing and reviewing of requirements?

<p>Marketability of the product (A)</p> Signup and view all the answers

What is a key responsibility of the project manager regarding requirement agreements?

<p>To communicate changes to stakeholders (C)</p> Signup and view all the answers

What is a major risk associated with scope creep in project management?

<p>Agreements to minor changes can lead to project delays (C)</p> Signup and view all the answers

Which statement best describes the importance of investment appraisal in project management?

<p>It enhances decision-making by evaluating project feasibility. (C)</p> Signup and view all the answers

Which aspect should be confirmed in both the business case and the project management plan?

<p>Project objectives (C)</p> Signup and view all the answers

What does the acronym ROI stand for in project management?

<p>Return on Investment (C)</p> Signup and view all the answers

Which of the following is NOT a factor considered in the costs during investment appraisal?

<p>Social implications (D)</p> Signup and view all the answers

What is the role of a project manager concerning requirements management?

<p>To enforce strict adherence to project procedures (A)</p> Signup and view all the answers

Which aspect of requirements is NOT part of the major characteristics to examine during testing?

<p>Brand reputation (A)</p> Signup and view all the answers

What is the correct formula for calculating the average return per year from an investment?

<p>(Total return - Investment) / Number of years (B)</p> Signup and view all the answers

What does the net present value (NPV) measure?

<p>The profitability of an investment based on expected future cash flows (A)</p> Signup and view all the answers

If an investment of $100 at 6% interest for 3 years yields a future value of $119.10, what is the present value factor used in the calculation?

<p>0.840 (D)</p> Signup and view all the answers

What is the first step to calculating the present value of a future cash flow?

<p>Divide the future value by the discount factor (C)</p> Signup and view all the answers

How is the average return on investment (ROI) expressed?

<p>As a percentage of the investment cost (B)</p> Signup and view all the answers

What discount rate would provide a present value factor of 0.890 after 2 years if the investment earns an interest of 6%?

<p>6% (B)</p> Signup and view all the answers

In calculating net cash flow for NPV, what must be done for each year of the projected life?

<p>Discount the cash flow separately (B)</p> Signup and view all the answers

If a company invests $12,000 with a return of $24,000 expected over 6 years at an 8% discount rate, what influences the decision on cash flow receipt?

<p>The timing and method of receiving income (A)</p> Signup and view all the answers

What does a cost/benefit analysis primarily evaluate?

<p>The comparison of project costs with perceived benefits (A)</p> Signup and view all the answers

Which of the following is NOT typically considered a benefit in cost/benefit analysis?

<p>Market share increase (D)</p> Signup and view all the answers

What does IRR stand for in the context of investment appraisal?

<p>Internal Rate of Return (A)</p> Signup and view all the answers

When should a cost/benefit analysis be conducted during a project?

<p>At the end of every project phase (B)</p> Signup and view all the answers

What component is crucial in determining the length of time needed to recover project expenses?

<p>Payback period (A)</p> Signup and view all the answers

Which of the following factors is hardest to quantify in financial terms during analysis?

<p>Staff morale (B)</p> Signup and view all the answers

Which option best reflects the significance of conducting a cost/benefit analysis?

<p>It aids in making structured evaluations regarding project feasibility (B)</p> Signup and view all the answers

What does the equation for Net Present Value typically involve?

<p>Incoming moneys minus outgoing moneys (C)</p> Signup and view all the answers

What is a primary function of Key Performance Indicators (KPIs)?

<p>To measure specific outcomes in a project (B)</p> Signup and view all the answers

Which of the following describes an example of a leading indicator?

<p>Number of new customers acquired this month (D)</p> Signup and view all the answers

Which characteristic is NOT part of the SMARTEST criteria for good KPIs?

<p>Resource-dependent (A)</p> Signup and view all the answers

Why is it important for KPIs to link to strategic imperatives?

<p>To align performance with the organization's goals (B)</p> Signup and view all the answers

What does the 'R' in the SMARTEST acronym stand for?

<p>Relevance (A)</p> Signup and view all the answers

Which KPI characteristic emphasizes the need for ethical considerations in measurement?

<p>Ethical (A)</p> Signup and view all the answers

What does the acronym KPIs stand for?

<p>Key Performance Indicators (D)</p> Signup and view all the answers

What is a common misconception about KPIs?

<p>All KPIs must be measurable (A)</p> Signup and view all the answers

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Study Notes

Business Case

  • It's a document that outlines the project's advantages, parameters, justification, and 'why'
  • Provides financial case for investment appraisal
  • Includes known information about the project
  • Created by the client or director of a client organization, not the project manager

Project Sponsor/Champion

  • Monitors project manager's performance
  • Ensures project objectives are met and resources are sufficient
  • Acts as a business leader and advocate to the board
  • Supports smooth stakeholder relations
  • Ensures the perceived benefits of the project are realized

Requirements Management

  • Focuses on identifying, analyzing, and managing project needs
  • Aligns with stakeholder expectations
  • Prioritizes requirements and manages changes

Project Manager's Role in Requirements Management

  • Determines the feasibility and desirability of requirements
  • Agrees with stakeholders on requirements
  • Balances cost, time, and performance factors

Requirements to Project Objectives

  • Incorporates requirements as clear deliverables
  • Confirms objectives in the business case and project management plan
  • Handles changes to requirements before and after project scope finalization

Managing Changes in Requirements

  • Considers the impact of changes on cost, time, and project processes
  • Communicates changes to stakeholders
  • Adheres to project-change procedures and configuration management

Documenting and Tracking Requirements

  • Uses a reporting matrix for logging requirements including document number, prepared by, information source, recipients and issue date

Testing and Reviewing Requirements

  • Examines feasibility, functionality, performance, quality, reliability, compliance, buildability, transportability, storage, security, environmental and sociological impact, labor, staffing, outsourcing, and training needs

Avoiding Scope Creep

  • Recognizes risks of agreeing to minor changes without proper procedures
  • Treats all changes as official
  • Considers commercial decisions and political considerations

Investment Appraisal

  • Evaluates project feasibility through a structured analysis
  • Includes a cost/benefit analysis
  • Considers factors like capital, operating, overhead costs, support & training costs, dismantling & disposal costs, and potential cost savings

Return On Investment (ROI)

  • Calculates the efficiency or profitability of an investment
  • Compares net profit or benefit to its cost
  • Expresses the result as a percentage

Net Present Value (NPV)

  • Evaluates the profitability of an investment by calculating the present value of its expected future cash flows, discounted back to their value in today's terms
  • Considers the time value of money and its value in today's terms

Cost/Benefit Analysis

  • Compares the costs of the project with the perceived benefits
  • Usually conducted at the end of each phase
  • Helps determine the project's viability

Key Performance Indicators (KPI)

  • A criterion against which a specific part of the project can be measured
  • Can be a milestone to be met
  • Can be any other important stage in a project

Characteristics of Good KPIs

  • Objective evidence
  • Measure the right things
  • Linked to strategic imperatives
  • Track how performance changes
  • Track things that matter
  • SMARTEST (Significant, Measurable, Attainable, Relevant, Trackable, Ethical, Supported, Time-bound)

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