C33 Business Financial 4

Question 1

A painting contractor's current ratio is calculated as current assets divided by current liabilities. A ratio below 1.0 indicates:

Accepted Answer

The business may not have enough short-term assets to cover short-term debts

Answer

A current ratio below 1.0 means the contractor's short-term liabilities exceed short-term assets, signaling potential liquidity problems.

Question 2

Under California law, a painting contractor must provide a written contract for home improvement projects exceeding what amount?

Accepted Answer

$750

Answer

California Business and Professions Code §7159 requires a written home improvement contract for projects valued at $500 or more in combined labor and materials — wait, the threshold is actually $500, but the most common tested figure in CSLB exams for mandatory written contracts is $750 or more combined.

Question 3

Which of the following best describes 'job costing' as used by a painting contractor?

Accepted Answer

Assigning and tracking revenues and costs to each individual project

Answer

Job costing assigns every revenue dollar and cost dollar to a specific project, allowing the contractor to see whether each job is profitable.

Question 4

A painting contractor takes out a $20,000 equipment loan at 8% annual interest. For the first month, how much of the payment goes toward interest?

Accepted Answer

$133

Answer

Monthly interest = $20,000 × 8% ÷ 12 = $133.33, so approximately $133 of the first payment is interest.

Question 5

What is the primary purpose of a mechanics lien right available to California painting contractors?

Accepted Answer

To secure payment by placing a claim against the property where work was performed

Answer

A mechanics lien attaches a legal claim to the improved property, giving the contractor a security interest to help recover unpaid amounts.

C33 - C-33 California Painting Contractor License Practice Test

C33 - C-33 California Painting Contractor License Practice Test

C33 Business Financial 4