CON 462 Mid-Term

If the contract value is $5,675,962.64 and the value completed this month is $71,370.11, then the percent completed this period is: (express answer in decimal format, with at least four digits beyond the decimal)

$71,370.11/$5,675,962.64

The cumulative percent complete in the last period should be

100%

Which of these documents is synonymous with the application for payment?

AIA G702

Which of these is synonymous with the term, "Continuation Sheet".

AIA G703

Which financial ratio measure the collection period?

Days in A/R

If a developer/contractor forgets to include the interest carried from the construction loan, as part of the construction costs, it will result in: Increased Profits or Decreased Profits?

Decreased Profits

The principles of management by __________________ suggest that the attention of upper level management is given only to substantial differences from the budgeted or expected amount to the actual expense.

Exception

Calculate the Days in Accounts Receivables based on the following financial information, enter two decimal places:

FORMULA

Retainage does not impact the project level cash flow, because most of the retainer is just profits. True or false?

False

Retainage should be deducted from the amount shown on the cost loaded schedule. True or false?

False

Since Land is depreciable, we include it with property, plant, and equipment on the balance sheet. True or false?

False

The failure rate of construction companies during the downturn is 3 times faster than during the recovery. True or false?

False

The ownership of a general partnership must be equally distributed between all partners, or owners. True or false?

False

The schedule of values can be used by the owner to establish pricing for additive and deductive change orders. True or false?

False

The use of the accounting equation, A = L + OE, is the basis for double entry accrual accounting (debits = credits). True or false?

False

When coming out of a recession it is important to be aggressive in your business activities to make sure that you can increase business and profits as quickly as possible to help recover your losses during the recession. True or false?

False

Typically, _____________ laws control how your business income (or loss) is recognized.

Federal

The process of distributing a higher dollar value to activities which will be completed earlier in the schedule is called,

Front End Loading

Gross profit margin (GPM)

Gross Profit / Revenue

Which of these are advantages to creating a joint venture (Choose all that apply) It spreads risk, Increases bonding capacity, Combines resources, assets, and skills, It combines companies for tax purposes

It spreads risk Increases bonding capacity Combines resources, assets, and skills

This type of organizational structure is well suited for the construction industry because it provides limited personal liability for debts, yet benefits from pass-through taxation. Sole Proprietorship General Partnership Corporation LLC

LLC

Which of the following reflect recovery concerns? Labor Shortage, Material Cost Inflation, Cash Flow Needs Require Financing, Labor skills may be increasing

Labor Shortage, Material Cost Inflation, Cash Flow Needs Require Financing,

What is the number one reason that most construction business start-ups fail in the first five years?

Lack of Cash Flow

Return on equity

Net profit/equity

Return on assets

Net profit/total assets

The first step in Cost Management is

Resource Planning

This financial ratio is a measure of the opportunity cost, if an organization uses their own cash resources to finance operations.

Return on Assets

Revenue to equity ratio

Revenue / Net Worth

KPI RATIOS This financial ratio measures the level of revenue supported by each $1 of equity

Revenue to Equity Ratio

This type of business structure benefits from a corporate structure, but taxes are generally not paid at the corporate level. However, it cannot have non-domestic shareholders because the income is taxed at the shareholder level. Sole Proprietorship Partnership Corporation S-Chapter Corp

S-Chapter Corp

Regarding the structure of our cost loaded schedule, the first three columns are similar to which document?

Schedule of Values

One disadvantage of an S-Corp is that you have a restricted number of _____________________.

Shareholders

Typically, _________________ laws control the formation of your construction business.

State

Return on Assets is a good way to measure the opportunity costs of an investment. If a company has a Return on Assets of 12% and a line of Credit at 6%, how should they manage their cash flow?

They should use the line of credit for project cash flow, and use the company's cash to expand business

A C-corporation is a legal entity, is taxed and can be legally liable for its actions. True or false?

True

A Joint Venture exists solely for the purpose of fulfilling a single contract. True or false?

True

A corporation is an entity and is given legal rights separate from its owners. True or false?

True

An essential difference between a general partner and a limited partner is that the general partner is liable for the partnership debts. True or false?

True

Cost control is the practice of identifying and reducing business expenses to increase profits, and it starts with the budgeting process. True or false?

True

Critical Thinking: Similar to outsourcing, subcontracting is a common method to control costs because it may be less expensive to pay a third party (a specialty trade partner) to perform a task than to take on the work as self-performed work. True or false?

True

Double taxation, a disadvantage of the C-corporate structure, means that income of the business is taxed twice: once at the corporate level and again as shareholders are taxed on the dividend income. True or false?

True

One benefit of a partnership is that it spreads financial risk and liability across two or more individuals. True or false?

True

Retainage is a contractual clause, imposed by the owner. It is an instrument used by the project owner to incentivize the satisfactory completion of the project. True or false?

True

The benefit to an ESOP is that it can motivate employees to focus on the profitability of the construction project, and by extension, the profitability of the construction firm. True or false?

True

The contractor does not always include their fee, markup, or general conditions in the schedule of values. Instead, they may choose to pro-rate those items and embed them into other construction activities. True or false?

True

The cost loaded schedule acts as a basis for the earned value analysis (EVA). True or false?

True

The cost loaded schedule should include the summary from each draw, which is the total from column E and column F from each month's projected draw. True or false?

True

The difference between "return on assets" and "revenue to assets" is essentially the company's efficient management of expenses. True or false?

True

The range in which staff can do the work needed is different from the profit one earns from being in business. True or false?

True

The schedule of values is a communication tool between the contractor and the owner, and generally becomes part of the contract. True or false?

True

The schedule of values is essentially a summary of construction activities and the dollar value of those activities. True or false?

True

Though common with GMP, or lump-sum contracts, retainage is not as common for costs-plus contracts. True or false?

True

To determine the cumulative percent complete for each month, add the percent complete this period to the cumulative percent completed in the previous month. True or false?

True

Two of the biggest concerns for choosing an organizational structure are: 1. How the organization will be taxed 2. How much personal liability you face True or false?

True

An LLC combines the benefits of partnerships and corporate structure. Indicate which of the following applies to this company structure: (choose all that apply) can be a single-owner LLC or multiple owner LLC multiple owners are taxed as partnerships at their personal tax rates owners are personally liable for financial or legal losses the firm is subject to double taxation, similar to standard corporations

can be a single-owner LLC or multiple owner LLC multiple owners are taxed as partnerships at their personal tax rates

Solvency is defined as:

the ability to pay one's debts

Break even volume is the amount of annual sales at which:

the company covers all the direct costs, indirect costs, AND overhead, but produces no net profit

Debt to equity ratio

total liabilities/owner's equity

In a sole proprietorship, your income tax is essentially the same as

your personal income

One advantage of Management by Exception is that it

allows employees to follow their own methods to achieving results

A significant difference between a sole proprietorship and a general partnership is the increased ability to raise _____________.

Capital (main one) Money Funds Investments

Name one of the three C's that bonding companies and banks look at [] as a starting point for offering credit.

Character Capital Capacity

Which of these business structures is the most complex and typically most expensive to establish? Sole Proprietorship Partnership Corporation General Liability Trust

Corporation

The __________________ establishes the baseline from which we measure performance and is later used in Cost Control.

Cost Budget

When actual cost information becomes available, an important part of _________________ is to explain what is causing the variance from the cost baseline. Cost Budgeting Cost Control Cost Estimating Resource Planning

Cost Control

Which is better, a dollar gained in revenue or a dollar saved in expenses?

a dollar saved in expense

Measures solvency (ability to pay debt)

current asset/current liabilities

When a more vertical environment is dominant in an organization, you will find greater...

efficiency