Building finance tutorials

Answers for Tutorial 3: Lecture 1(Topic 1)
1.

According to the Surety Information Office, what are the six warning signs that a construction company is in financial trouble?
- Ineffective financial management systems
- Lines of credit constantly borrowed to the limits
- Poor estimating and/or job cost reporting
- No comprehensive business plan
- Communication problems

2.

Who is responsible for financial management in a construction company?
- Owners
- General Managers
- Chief Financial Officer (CFO)
- Estimators
- Project Managers
- Superintendents: supervisor, workers

3.

Why is construction financial management different from the financial management of other companies?
i. Project oriented
- Greater variety of projects (products)
- Harder to determine the cost of projects
- Cannot stockpile completed work for future
- Greater need for detailed job cost accounting ii. Decentralized
- Must track equipment iii. Payment terms
- Progress payments
- Retention iv. Heavy use of subcontractors

4.

What activities are involves in accounting for the company’s financial resources?
i. Making sure costs are accurately tracked through the accounting system ii. Ensuring that the construction accounting system is functioning properly iii. Projecting the costs at completion for the individual projects, including unbilled committed costs iv. Determining whether the individual projects are over or under billed
v. Making sure that the needed financial statements have been prepared vi. Reviewing the financial statement
- In line with the rest of the industry
- Identify potential financial problems before they become a crisis

5.

What activities are involves in managing the company’s costs and profits?
i. Controlling project costs ii. Monitoring project and company profitability iii. Setting labour burden markups iv. Developing and tracking general overhead budgets
v. Setting the minimum profit margin for use in bidding