General Contractor License Business and Finance Management Questions and Answers

Question 1

A contractor has current assets of $250,000 and current liabilities of $120,000. What is the company's working capital?

Accepted Answer

$130,000

Answer

$120,000

Answer

$250,000

Answer

$370,000

Question 2

A construction company primarily undertakes large, multi-year government infrastructure projects. Which accounting method would provide the most accurate picture of the company's financial performance over the life of the projects?

Accepted Answer

Percentage of Completion Method

Answer

Completed Contract Method

Answer

Cash Basis Method

Answer

Cost-Plus Method

Question 3

A client needs a small, urgent repair project completed, but the full scope of the work is unknown and difficult to define upfront. Which type of contract would be most appropriate for this situation, protecting the contractor from financial loss due to unforeseen complexities?

Accepted Answer

Time and Materials (T&M) Contract

Answer

Lump Sum (Fixed Price) Contract

Answer

Guaranteed Maximum Price (GMP) Contract

Answer

Unit Price Contract

Question 4

To measure a company's ability to meet its short-term obligations using only its most liquid assets, a financial manager would calculate the:

Accepted Answer

Quick Ratio (Acid-Test Ratio)

Answer

Current Ratio

Answer

Debt-to-Equity Ratio

Answer

Working Capital Turnover

Question 5

Which of the following AIA documents is the cover sheet that summarizes the total amount due to the contractor in a payment application, including retainage and a summary of change orders?

Accepted Answer

AIA G702 - Application and Certificate for Payment

Answer

AIA G701 - Change Order

Answer

AIA G703 - Continuation Sheet

Answer

AIA G706 - Contractor's Affidavit of Payment

Question 6

A construction company records revenue from a project only after all work has been fully completed and the client has accepted the project. This company is using which accounting method?

Accepted Answer

Completed Contract Method

Answer

Accrual Method

Answer

Percentage of Completion Method

Answer

Installment Method