Finance for Project Managers

The Earnings Statement is a financial report that shows business profitability over some time period.

The Earnings Statement is a financial report that shows business profitability over some time period.  This lesson will focus on the revenue portion of the Earnings Statement.

The Earnings Statement is a financial report that shows business profitability over some time period.  This lesson will focus on the expense portion of the Earnings Statement.

The Balance Sheet is the financial report that shows what the business is worth at some instant in time.

The Balance Sheet is the financial report that shows what the business is worth at some instant in time.  This lesson will focus on the Asset side of the Balance Sheet.

The Balance Sheet is the financial report that shows what the business is worth at some instant in time.  This lesson will focus on the Liabilities and Equity side of the Balance Sheet.

The Cash Flow Statement is a financial report that shows how well the company was able to convert business activity into cash over some time period.

The Cash Flow Statement is a financial report that shows how well the company was able to convert business activity into cash over some time period.  This lesson will focus on sources of cash.

The Cash Flow Statement is a financial report that shows how well the company was able to convert business activity into cash over some time period.  This lesson will focus on uses of cash.

Each of the financial statements provides insight on an aspect of the business financial status and structure. These accounts across the statements are related, and changes to values will likely impact multiple statements.

When calculating profitability, the different profit measures provide insight into the most significant factors that are creating corporate profit or loss. 

Return ratios are normally used for comparing companies or comparing the past performance of a company with its present performance.

It is important to know what category of account you are working with when budgeting and tracking spending.  The different categories of accounts behave differently so knowing which category you are working with will provide insight into the budgeting and tracking process.

Most businesses prepare a strategic plan that projects how the company will achieve or maintain a competitive advantage.  It is used to guide the budgeting process.

Estimating is used when planning and budgeting business costs or revenues. The estimate needs to include both the amount and the timing of the transaction.

Whenever a company purchases an asset with long term value, it must be capitalized. Every asset that is capitalized is then depreciated, which is special form of amortization. 

If you capitalize a fixed asset, you are required to depreciate it on the business financial books.

A Financial Reserve is money that has been budgeted for a general purpose (department, project or initiative, but not specifically allocated to a task or activity.

Budget baselines should be used if costs must be controlled within a department or on a project. 

The business case provides the business rationale, normally in financial terms, of why a project should be done.

Return on Investment is a financial calculation to determine whether the business benefit of an investment is worth the cost.

The Payback Period is a Return on Investment analysis that determines the amount of time needed to accumulate enough benefit to pay for the cost of the project.

The Breakeven Point is a Return on Investment analysis that determines the number of units or amount of sales that are needed to accumulate enough benefit to pay for the cost of the project.

The Internal Rate of Return is a Return on Investment analysis that determines an “equivalent interest rate” that if applied to the investment would yield a similar return as the project is forecasted to return over a set time period.

The business financial system records costs based upon the cost account type.  The costs are often accrued near the end of fiscal quarter or year.

Project costs and investments are the business expenses required to complete a project.  Tracking the magnitude and timing of those costs are important indicators of project success.

Cost variance reporting is the calculation and reporting of costs that are different than what was expected by the budget or standard.

Financial forecasts for the final cost of activities are created to allow activity managers to make wise business decisions.  The approach used for forecasting should vary based upon the nature of the activities being forecasted.

Earned Value Management is a comprehensive project management technique that combines scope, schedule and resource management into one set of measures.  It is used for planning, variance analysis and forecasting.

Earned Value Management is a comprehensive project management technique that combines scope, schedule and resource management into one set of measures.  The Earned Value analysis rests on task level planning and earned value calculations.

Earned Value Management is a comprehensive project management technique that combines scope, schedule and resource management into one set of measures.  The Earned Value variance analysis is an analytical method for separating cost and schedule effects from financial variances.

Earned Value Management is a comprehensive project management technique that combines scope, schedule and resource management into one set of measures.  With these measures a project forecast can be generated.