Business and Financial Management Flashcards
6 cards from real CC practice questions. Tap to flip, then mark Knew It or Still Learning — missed cards come back until you master them.
Read the first 6 Business and Financial Management flashcards as text
What is a 'performance bond' in construction?
Answer: A bond guaranteeing that the contractor will complete the project according to the contract terms
A performance bond protects the project owner by ensuring that if the contractor fails to complete the work, the surety will step in to finish the project or compensate the owner.
What is a 'payment bond' and who does it protect?
Answer: A bond guaranteeing that subcontractors and suppliers will be paid, protecting them if the GC defaults
A payment bond ensures that subcontractors, laborers, and material suppliers are paid even if the general contractor becomes insolvent.
Why should a contractor maintain separate bank accounts for business and personal finances?
Answer: To protect the corporate veil and simplify tax reporting and job cost tracking
Commingling personal and business funds can pierce the corporate veil, exposing personal assets to business liabilities and complicating audits.
What is a 'draw schedule' on a construction project?
Answer: A timeline specifying when and how much the contractor will be paid as work progresses
A draw schedule outlines the payment milestones (e.g., 10% at foundation, 20% at framing) tied to project progress for releasing funds.
What does 'cash flow management' mean for a contractor?
Answer: Ensuring enough cash is on hand to pay expenses even when client payments are delayed
Contractors must manage the timing of incoming payments and outgoing expenses to avoid running out of money mid-project, even if they are profitable on paper.
What is the purpose of carrying 'general liability insurance' as a contractor?
Answer: To cover third-party bodily injury and property damage claims arising from construction operations
General liability insurance protects contractors against claims from property owners or third parties for injuries or property damage caused during construction work.