Exam
Name___________________________________
MULTIPLE CHOICE. Choose the one alternative that best completes the statement or answers the
question.
1)
1)
In the last 37 years, how many years has the business failure rate for the construction industry
been below the combined average failure rate for all business sectors in the United States?
A)
37
B)
32
C)
5
D)
0
Answer:
C
Explanation:
A)
B)
C)
D)
2)
2)
What percent of the business failures in 2013 occurred in construction businesses between six and
ten years old?
A)
12.1%
B)
8.5%
C)
17.2%
D)
4.9%
Answer:
C
Explanation:
A)
B)
C)
D)
3)
3)
Project owners often withhold ________ thus ________ payment of a portion of the progress
payment.
A)
profit, deferring
B)
profit, accelerating
C)
retention, accelerating
D)
retention, deferring
Answer:
D
Explanation:
A)
B)
C)
D)
4)
4)
Which of the following construction personnel are responsible for one or more financial
management tasks?
A)
Project managers
B)
Superintendents
C)
Estimators
D)
All of the above
Answer:
D
Explanation:
A)
B)
C)
D)
1
5)
5)
In which chapter of the book would information about quantitative methods that may be used to
analyze financial alternatives be found?
A)
Chapter 15
B)
Chapter 16
C)
Chapter 17
D)
Chapter 18
Answer:
C
Explanation:
A)
B)
C)
D)
6)
6)
Which sector has the highest establishment failure rate?
A)
Non–residential building
B)
Residential
C)
Specialty contractors
D)
Heavy and civil construction
Answer:
B
Explanation:
A)
B)
C)
D)
7)
7)
Understanding financial management helps the construction manager complete which of the
following tasks?
A)
Estimate labor costs
B)
Interpret accounting reports
C)
Estimate equipment costs
D)
All of the above
Answer:
D
Explanation:
A)
B)
C)
D)
8)
8)
In which chapter of the book would information on setting profit margins be found?
A)
Chapter 7
B)
Chapter 8
C)
Chapter 9
D)
Chapter 10
Answer:
D
Explanation:
A)
B)
C)
D)
9)
9)
In which chapter of the book would information on how to develop a cash flow for a construction
project be found?
A)
Chapter 11
B)
Chapter 12
C)
Chapter 13
D)
Chapter 14
Answer:
B
Explanation:
A)
B)
C)
D)
2
10)
10)
Based on the data for 2013, what age of firm has the highest failure rate?
A)
2 years
B)
6 to 10 years
C)
1 year
D)
5 years
Answer:
C
Explanation:
A)
B)
C)
D)
11)
11)
A construction company is different from a manufacturer in that a construction company is
________ orientated.
A)
process
B)
project
C)
budget
D)
schedule
Answer:
B
Explanation:
A)
B)
C)
D)
12)
12)
In which chapter of the book would information on calculating the over– and under–billings be
found?
A)
Chapter 2
B)
Chapter 3
C)
Chapter 4
D)
Chapter 5
Answer:
C
Explanation:
A)
B)
C)
D)
13)
13)
In which chapter of the book would information on monitoring and controlling construction costs
be found?
A)
Chapter 7
B)
Chapter 8
C)
Chapter 9
D)
Chapter 10
Answer:
A
Explanation:
A)
B)
C)
D)
14)
14)
Hiring employees to perform the work on the project will require ________ financial resources
than if the company had hired subcontractors to perform the labor.
A)
the same
B)
more
C)
less
Answer:
B
Explanation:
A)
B)
C)
3
15)
15)
In which chapter of the book would information on how loan provisions and closing costs affect
the interest rate on loans be found?
A)
Chapter 15
B)
Chapter 16
C)
Chapter 17
D)
Chapter 18
Answer:
B
Explanation:
A)
B)
C)
D)
ESSAY. Write your answer in the space provided or on a separate sheet of paper.
16)
Define financial management.
Answer:
Financial management is the use of a company’s financial resources.
17)
What is one of the best ways for an employee to succeed in a company?
Answer:
Increasing the company’s profitability through sound construction financial management.
18)
Why do many construction companies rely heavily on subcontractors to perform work on projects?
Answer:
It allows a construction company to tap into a subcontractor’s financial assets during the construction
process.
19)
How do construction companies deal with fluctuations in demand? How does this compare with how
manufacturers deal with fluctuations in demand?
Answer:
Construction companies must constantly bid new work to keep the company’s workforce fully utilized
or build speculative projects. Manufacturers can produce and store extra products when demand is
slower for use when the demand is higher.
20)
Identify at least three questions that should be asked before deciding to bid on a large project.
Answer:
The question may include any of the following:
•Does the company have enough cash resources to perform this work or will the company need outside
financing?
•Can the company get bonded for this work?
•What changes need to be made in the company’s financial structure so that the company can get a bond
for the project?
•Should the company hire employees to perform the work or should the company subcontract out this
labor?
• Should the company lease or purchase the additional equipment needed for this project?
•If the company purchases the equipment, how should it be financed?
•Will this project require the company to increase its main office overhead?
•What profit and overhead markup should be added to the bid?
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Answer Key
Testname: C1
1)
C
2)
C
3)
D
4)
D
5)
C
6)
B
7)
D
8)
D
9)
B
10)
C
11)
B
12)
C
13)
A
14)
B
15)
B
16)
Financial management is the use of a company’s financial resources.
17)
Increasing the company’s profitability through sound construction financial management.
18)
It allows a construction company to tap into a subcontractor’s financial assets during the construction process.
19)
Construction companies must constantly bid new work to keep the company’s workforce fully utilized or build
speculative projects. Manufacturers can produce and store extra products when demand is slower for use when the
demand is higher.
20)
The question may include any of the following:
•Does the company have enough cash resources to perform this work or will the company need outside financing?
•Can the company get bonded for this work?
•What changes need to be made in the company’s financial structure so that the company can get a bond for the project?
•Should the company hire employees to perform the work or should the company subcontract out this labor?
• Should the company lease or purchase the additional equipment needed for this project?
•If the company purchases the equipment, how should it be financed?
•Will this project require the company to increase its main office overhead?
•What profit and overhead markup should be added to the bid?
5