CRC CRC Business & Financial Management

Question 1

Which financial statement shows a contractor's assets, liabilities, and equity at a specific point in time?

Accepted Answer

Balance sheet

Answer

The balance sheet provides a snapshot of a company's financial position — assets, liabilities, and owner's equity — on a given date.

Question 2

A residential contractor's overhead rate is calculated by dividing total overhead costs by which figure?

Accepted Answer

Total direct labor costs

Answer

The overhead rate is typically calculated by dividing total overhead costs by total direct labor costs to determine how much overhead to allocate per labor dollar.

Question 3

What type of business structure offers a residential contractor personal liability protection while avoiding double taxation?

Accepted Answer

Limited Liability Company (LLC)

Answer

An LLC provides personal liability protection like a corporation but is taxed as a pass-through entity, avoiding the double taxation that C-Corporations face.

Question 4

A contractor submits a Schedule of Values to the owner. What is its primary purpose?

Accepted Answer

To establish the basis for progress payment requests

Answer

A Schedule of Values breaks the contract sum into line items that correspond to work phases, forming the basis for monthly pay applications.

Question 5

Which ratio measures a company's ability to meet short-term obligations with its most liquid assets?

Accepted Answer

Current ratio

Answer

The current ratio (current assets ÷ current liabilities) indicates whether a contractor has enough short-term assets to cover short-term debts.

(CRC) Certified Residential Contractor Practice Test

(CRC) Certified Residential Contractor Practice Test

CRC CRC Business & Financial Management