CC Business and Financial Management 3

Question 1

What is a 'performance bond' in construction?

Accepted Answer

A bond guaranteeing that the contractor will complete the project according to the contract terms

Answer

A bond covering material defects only

Answer

A bond paid by the property owner

Answer

A type of contractor license fee

Question 2

What is a 'payment bond' and who does it protect?

Accepted Answer

A bond guaranteeing that subcontractors and suppliers will be paid, protecting them if the GC defaults

Answer

A bond covering the owner's payment to the GC

Answer

A bond replacing workers' compensation

Answer

A bond that replaces a lien waiver

Question 3

Why should a contractor maintain separate bank accounts for business and personal finances?

Accepted Answer

To protect the corporate veil and simplify tax reporting and job cost tracking

Answer

To earn higher interest rates

Answer

To avoid licensing fees

Answer

To qualify for a lower insurance rate

Question 4

What is a 'draw schedule' on a construction project?

Accepted Answer

A timeline specifying when and how much the contractor will be paid as work progresses

Answer

A blueprint drawing timeline

Answer

A subcontractor payment log

Answer

A material delivery schedule

Question 5

What does 'cash flow management' mean for a contractor?

Accepted Answer

Ensuring enough cash is on hand to pay expenses even when client payments are delayed

Answer

Counting cash in the office safe

Answer

Paying subcontractors in cash to avoid paperwork

Answer

Managing petty cash funds

Question 6

What is the purpose of carrying 'general liability insurance' as a contractor?

Accepted Answer

To cover third-party bodily injury and property damage claims arising from construction operations

Answer

To replace a contractor's license

Answer

To cover employee injuries on the job

Answer

To pay for building permit fees