CRC Business & Financial Management Flashcards

When calculating a project's break-even point, a contractor must determine the level of revenue at which?

Answer: Total revenues equal total costs (fixed + variable)

The break-even point is where total revenue exactly covers all costs — fixed overhead and variable direct costs — resulting in zero profit or loss.

A 'mechanic's lien' in residential construction can be filed by which parties?

Answer: Subcontractors, suppliers, and laborers who have not been paid

Under most state lien laws, any party that furnished labor, materials, or services to a project and was not paid can file a mechanic's lien against the property.

What does 'general liability insurance' protect a residential contractor against?

Answer: Third-party bodily injury and property damage claims arising from operations

General liability insurance covers claims from third parties (e.g., a homeowner or visitor) for bodily injury or property damage caused by the contractor's work or operations.

Which accounting method records income and expenses only when cash is actually received or paid?

Answer: Cash basis accounting

Under cash basis accounting, revenue is recognized when payment is received and expenses are recorded when bills are paid, regardless of when the work was performed.

A Florida CRC contractor must renew their license every how many years?

Answer: 2 years

Florida Certified Residential Contractor licenses are issued on a two-year cycle and must be renewed biennially with required continuing education completed.

What is the primary purpose of a construction 'payment bond' on a residential project?

Answer: To guarantee that subcontractors and suppliers will be paid

A payment bond ensures that the contractor will pay all subcontractors, laborers, and material suppliers, protecting them and the owner's property from mechanic's liens.