CCIFP Construction Project Financing and Capital Structure 2

Question 1

Retainage in construction contracts is typically released when:

Accepted Answer

Substantial completion or final completion is achieved

Answer

The contractor submits the first draw request

Answer

The project reaches 50% completion

Answer

The surety bond is issued

Question 2

Which type of bond guarantees that a construction contractor will complete the project according to contract terms?

Accepted Answer

Performance bond

Answer

Payment bond

Answer

Bid bond

Answer

Maintenance bond

Question 3

Under the percentage-of-completion method, contract revenue is recognized based on:

Accepted Answer

Costs incurred to date divided by total estimated costs

Answer

Cash received from the owner

Answer

Number of months elapsed

Answer

Billings issued to the owner

Question 4

A contractor with negative working capital may signal which risk to lenders and sureties?

Accepted Answer

Inability to meet short-term obligations

Answer

Excessive equity investment

Answer

Overly conservative bidding strategy

Answer

Strong project pipeline

Question 5

In construction project financing, a 'completion guarantee' is typically provided by:

Accepted Answer

The general contractor to the lender

Answer

The lender to the project owner

Answer

The subcontractor to the general contractor

Answer

The architect to the owner

Question 6

What is the purpose of a joint check agreement in construction financing?

Accepted Answer

To ensure payment is made jointly to the contractor and subcontractor/supplier

Answer

To allow two lenders to share a single loan

Answer

To split project equity between two owners

Answer

To satisfy federal wage requirements