I’ve read several sources that both concur on what you need to know that is financial in nature, but what won’t be asked on the PMP exam.
Since I have an Economics background, a lot of this stuff was pretty intuitive, but I’ll repost what I’ve made up.
Accounting (Finance) Concepts to know (but aren’t math problems)
PV = Present Value. You can find the present value by
PV=FV/(1+I)t
What you need to know is that the present value should be a positive number.
Don’t confuse this with PLANNED VALUE
NPV= Net Present Value
You don’t need to quantify this, but you do need to know that generally speaking that the bigger the number the better.
IRR = Internal Rate of Return
The larger the percentage, the better.
Payback Period =
You just need to know which project will payback sooner.
Benefit Cost Ratio =
Generally the higher ratio is the better one.
Economic Value Added =
The company needs to know if the project has more value than it costs.
Don’t confuse this with ECONOMIC VALUE ANALYSIS.
Opportunity Costs =
What it costs to give up one of the projects.
Sunk Costs =
Money you’ve already spent. Don’t consider the sunk cost = they’re gone.
Law of diminishing returns =
Do I need to state the obvious?
Working capital =
Current Assets – Current liabilities
Depreciation =
- Straight Line depreciation
- Accelerated depreciation
