Three main forms of business.
- Sole traders own all the assets of a business and are responsible for all risks, obligations and debts.
- A company must have a registered name, more than one share holder and more than one director.
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F- A company must have a registered name, one or more shareholder and one or more director
Companies, Partnerships and Sole traders.
Structure of companies.
- Good governance is the effective separation, management and execution of the relationships, duties, obligations and accountability of an entity, such that the entity is best able to fulfill its purpose.
- The board of directors own the company, but hires the CEO to run it on a daily basis.
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F- shareholders own the company and employ a board of directors to run it on a daily basis.
Shareholders > Board of directors > Top management > Staff
Structure of companies.
- The agency problem describes a situation where a manager who is principally an agent for stockholders acts in his own interest instead of maximizing market value.
- The agency problem cannot happen if the CEO is also the majority shareholder in a company.
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F
Accounting, economics and finance
- Accounting relates to preparation of accounting records, preparation, analyzing and interpolation of financial statements
- Economics is a study of choices made by people who are faced with scarity
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T
Finance - consists of investments, decisions of institutions to invest
The following activities belong to the finance manager:
- Hedging, investing
- Planting, spacing
~T
F
Which of the following statements is true
- The payback rule specifies that a project be accepted if its payback period is less than the specified cut-off period
- By using the payback rule the emphasis is on profitability
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F- emphasis is on liquidity
Which of the following statements are true?
Return on Investment (ROI) uses the ratio of cashflows (gained) and initial investment, it takes
-no account of time value of money
-no account of the size of a project
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T
In a normal costing method
- Actual costs are used to calculate the overhead for projects
- A predetermined overhead, based on previous figures is used.
F- indirect costs are used to calculate the overhead for projects
T
Which of the following statements is true?
- Process costing differentiates the (direct) costs per job to see how profitable each job is
- Job order costing assigns average costs to each unit of production
F- Process costing assigns average costs to each job
F- Job ordering differentiates the costs per job to see how profitable each job is
Estimating
- If your average profit is 4%, then the estimates must be more accurate than 4% before we should use them in a tender or offer
- The objective of estimating is to be as accurate as possible
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F- No need to know to a high precision
Estimating
- At about 30% - 40% finished design, ,any critical design desicions, such as building footprint, major equipment types, processes, etc. have been made
- At 90% finished design, a set of documents will be sent to the permitting authorities for their review
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T
Which of the following is not an example of jobsite overhead?
- jobsite personnel wages and fringe benefits
- jobsite personnel project related travel expenses
- Bonds, insurance, permits and taxes
- All of the above are jobsite overhead costs
All of the above are jobsite overhead costs
According to project dynamics, the difference between outsourcing and collaboration goes according to two basic laws
- Two or more players which want to deliver the same products or the same processes at an equal scale level should collaborate
- Two or more players which want to deliver complementary products or complimentary processes at an equal scale should always be placed in an outsourcing competition
F- same processes should be placed in outsource competition
F- complimentary processes should collaborate
There are several risk mitigation handling options:
- Avoid: adjust program requirements or constraints to eliminate or reduce risk. This adjustment could be accommodated by a change in funding, schedule, or technical requirements.
- Control: Implement actions to minimize the impact or likelihood of the risk.
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T
Company finance.
- The purpose if the income statement is to show whether or not a company’s business is profitable. It shows the profit or the loss over a period of time.
- In an income statement, the difference between profit before income tax and the gross profit is the finance cost
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F- Gross profit - Operating costs - financing costs = profit before income tax
A balance sheet shows a company’s financial position at a point in time, a snap shot. There are three major items in a balance sheet: Assets, Liabilities and Equity.
Which of the following is true?
-Under billed work belongs to the assets
-Over billed work belongs to the assets
-Under and over billed work belongs to the assets
-Neither under or over billed work belongs to the assets
Under billed work belongs to the assets
Which of the following statements is true?
- Working capital is a measure of the short term financial strength of a construction company.
- The liquidity of working capital is high, it is how much current assets exceed current liabilities.
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T
A company can increase its working capital by:
- Paying of bank loans with credit cards
- Purchasing equipment
F- having long term bank loans
F- selling equipment
S-curve
- The cumulitive expenditure curve of a construction project shows an S-curve
- The monthly cost of a construction project resembles an S-curve
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F
