Business and Finance Management Flashcards
7 cards from real General Contractor License practice questions. Tap to flip, then mark Knew It or Still Learning — missed cards come back until you master them.
Read the first 7 Business and Finance Management flashcards as text
A contractor's current ratio is calculated as current assets divided by current liabilities. A ratio below 1.0 generally indicates:
Answer: Insufficient liquidity to cover short-term obligations
A current ratio below 1.0 means the company has more short-term debts than short-term assets, signaling potential cash flow problems.
Under the percentage-of-completion accounting method, revenue is recognized:
Answer: Based on the proportion of work completed to date
Percentage-of-completion recognizes revenue proportionally as work progresses, matching revenue with costs incurred.
A general contractor wants to protect against losses from employee theft. Which type of insurance is most appropriate?
Answer: Commercial crime or fidelity bond insurance
Commercial crime insurance or fidelity bonds cover losses resulting from employee dishonesty, including theft of money or property.
What is the primary purpose of a 'schedule of values' in construction contracts?
Answer: To break down the contract sum for progress billing purposes
A schedule of values allocates the contract sum across work items, forming the basis for monthly progress payment applications.
If a contractor's bid is $500,000 and the owner requests a 10% reduction, what technique should the contractor use to identify where savings are possible?
Answer: Perform value engineering to reduce scope or find alternatives
Value engineering systematically analyzes project components to find cost-effective alternatives that maintain required function and quality.
A contractor collects a deposit before starting work. On the balance sheet, this unearned revenue is classified as:
Answer: A liability
Unearned revenue (deposits collected before work is performed) is a liability because the contractor owes the service to the client.
Which document formally establishes the scope of work, payment terms, and legal obligations between a general contractor and owner?
Answer: Construction contract
The construction contract is the legally binding agreement defining the rights, responsibilities, and obligations of both parties.