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?

Manage the day-to-day operations of the project Signup and view all the answers

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

To log specific project requirements Signup and view all the answers

What aspect of project requirements does a project manager prioritize?

Viability or desirability of requirements Signup and view all the answers

What happens to costs and timelines when project requirements change?

They can be impacted by changes to requirements Signup and view all the answers

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

Marketability of the product Signup and view all the answers

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

To communicate changes to stakeholders Signup and view all the answers

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

Agreements to minor changes can lead to project delays Signup and view all the answers

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

It enhances decision-making by evaluating project feasibility. Signup and view all the answers

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

Project objectives Signup and view all the answers

What does the acronym ROI stand for in project management?

Return on Investment Signup and view all the answers

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

Social implications Signup and view all the answers

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

To enforce strict adherence to project procedures Signup and view all the answers

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

Brand reputation Signup and view all the answers

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

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

What does the net present value (NPV) measure?

The profitability of an investment based on expected future cash flows 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?

0.840 Signup and view all the answers

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

Divide the future value by the discount factor Signup and view all the answers

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

As a percentage of the investment cost 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%?

6% Signup and view all the answers

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

Discount the cash flow separately 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?

The timing and method of receiving income Signup and view all the answers

What does a cost/benefit analysis primarily evaluate?

The comparison of project costs with perceived benefits Signup and view all the answers

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

Market share increase Signup and view all the answers

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

Internal Rate of Return Signup and view all the answers

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

At the end of every project phase Signup and view all the answers

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

Payback period Signup and view all the answers

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

Staff morale Signup and view all the answers

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

It aids in making structured evaluations regarding project feasibility Signup and view all the answers

What does the equation for Net Present Value typically involve?

Incoming moneys minus outgoing moneys Signup and view all the answers

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

To measure specific outcomes in a project Signup and view all the answers

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

Number of new customers acquired this month Signup and view all the answers

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

Resource-dependent Signup and view all the answers

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

To align performance with the organization's goals Signup and view all the answers

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

Relevance Signup and view all the answers

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

Ethical Signup and view all the answers

What does the acronym KPIs stand for?

Key Performance Indicators Signup and view all the answers

What is a common misconception about KPIs?

All KPIs must be measurable Signup and view all the answers

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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Description

This quiz covers essential concepts of project management, including the business case, the role of project sponsors, and requirements management. It addresses how project managers identify and prioritize project needs while ensuring stakeholder satisfaction and resource adequacy.