Financial Analysis and Reporting Flashcards

HR is analyzing turnover costs. If replacing an exempt employee costs approximately 50–200% of annual salary, and the average salary is $80,000, what is the low-end replacement cost estimate?

Answer: $40,000

50% of $80,000 = $40,000 as the low-end estimate for replacing an exempt employee.

What is the primary purpose of a workforce planning financial model?

Answer: To project future labor costs aligned with business forecasts

Workforce planning financial models link headcount and skill projections to cost forecasts, ensuring labor supply aligns with business strategy.

Which of the following is an example of a fixed labor cost?

Answer: Salaried employee compensation

Salaried compensation remains constant regardless of business volume, making it a fixed cost for budgeting purposes.

An HR department calculates its ROI on a leadership development program. Training cost $200,000 and the measured productivity gain was $320,000. What is the ROI?

Answer: 60%

ROI = (Net Benefit ÷ Cost) × 100 = ($120,000 ÷ $200,000) × 100 = 60%.

What does 'accrual basis accounting' mean in the context of HR expense reporting?

Answer: Expenses are recorded when incurred, regardless of when cash is paid

Accrual accounting matches expenses to the period in which they are incurred, not when the cash payment is made.

Which metric best helps HR quantify the financial impact of absenteeism?

Answer: Cost of absenteeism per employee

Cost of absenteeism per employee captures lost productivity, replacement costs, and administrative expenses attributable to unplanned absences.

In a cost-benefit analysis of an HR initiative, which item belongs in the 'benefits' column?

Answer: Reduced voluntary turnover savings

Reduced turnover represents a financial benefit (avoided replacement costs), while fees, licensing, and training materials are costs.