FLORIDA CONSTRUCTION INDUSTRY
LICENSING BOARD GENERAL
CONTRACTOR BUSINESS AND FINANCE
EXAM WITH QUESTIONS AND VERIFIED
ANSWERS, PLUS DETAILED
RATIONALES/EXPERT VERIFIED FOR
GUARANTEED PASS 2026/LATEST
UPDATE/INSTANT DOWNLOAD PDF
1. A Florida general contractor is preparing a bid for a project. The
estimated direct costs are $420,000, overhead allocated to the
project is $55,000, and the contractor wants a gross profit of
$75,000. What should the contractor's bid price be?
A. $495,000
B. $550,000
C. $575,000
D. $625,000
Answer: C. $550,000
Rationale: The total cost before profit is $420,000 + $55,000 =
$475,000. Adding the desired $75,000 profit produces a bid of
$550,000. A contractor must distinguish direct costs, allocated
overhead, and desired profit when establishing a selling price.
2. A contractor purchases materials for $80,000. The supplier offers a
2% discount if the invoice is paid within the specified discount
period. If the contractor pays within that period, how much is
saved?
1
,A. $800
B. $1,200
C. $1,600
D. $2,000
Answer: C. $1,600
Rationale: The discount is calculated as $80,000 × 0.02 = $1,600. The
contractor would therefore pay $78,400. Taking legitimate supplier
discounts can reduce job costs and improve project profitability.
3. A contractor's current assets are $600,000 and current liabilities are
$400,000. What is the company's current ratio?
A. 0.67:1
B. 1.0:1
C. 1.5:1
D. 2.0:1
Answer: C. 1.5:1
Rationale: The current ratio is calculated as current assets ÷ current
liabilities. Thus, $600,000 ÷ $400,000 = 1.5. A ratio above 1 generally
indicates that current assets exceed current liabilities, although the
adequacy of the ratio depends on the company's circumstances and
industry.
4. Which financial statement primarily reports a company's revenues,
expenses, and resulting net income or loss for a specific accounting
period?
A. Balance sheet
B. Income statement
C. Statement of cash flows
D. Accounts receivable aging report
Answer: B. Income statement
2
,Rationale: The income statement measures operating performance
over a period by reporting revenues and expenses and determining the
resulting profit or loss. The balance sheet reports financial position at
a particular date, while the cash-flow statement focuses on cash
movements.
5. A contractor has total assets of $1,200,000 and total liabilities of
$750,000. What is the owner's equity?
A. $350,000
B. $450,000
C. $750,000
D. $1,950,000
Answer: B. $450,000
Rationale: The fundamental accounting equation is Assets =
Liabilities + Equity. Therefore, Equity = Assets − Liabilities =
$1,200,000 − $750,000 = $450,000.
6. A contractor estimates a project's direct labor at $125,000 and
direct materials at $225,000. Equipment and subcontractor costs
total $75,000. What are the project's direct costs before overhead?
A. $300,000
B. $350,000
C. $425,000
D. $500,000
Answer: C. $425,000
Rationale: Direct costs are costs that can reasonably be traced to the
particular project. Here, $125,000 + $225,000 + $75,000 = $425,000.
General administrative expenses that support the business as a whole
would ordinarily be treated as overhead rather than direct job costs.
3
, 7. A contractor has annual overhead of $240,000 and expects to
perform $1,200,000 in annual direct construction work. Using a
direct-cost-based allocation, what overhead rate should be applied?
A. 10%
B. 15%
C. 20%
D. 25%
Answer: C. 20%
Rationale: The overhead rate is $240,000 ÷ $1,200,000 = 0.20, or 20%.
Applying an appropriate overhead allocation is important because
recovering only direct job costs without recovering operating expenses
can cause apparently profitable projects to produce an overall business
loss.
8. A contractor has an accounts receivable balance of $300,000.
During the year, credit sales were $1,800,000. What is the
approximate receivables turnover ratio using the ending
receivables balance as the simplified denominator?
A. 3 times
B. 4 times
C. 6 times
D. 9 times
Answer: C. 6 times
Rationale: Using the simplified calculation, receivables turnover =
credit sales ÷ receivables = $1,800,000 ÷ $300,000 = 6 times. A higher
turnover generally indicates faster collection, although the appropriate
benchmark varies by company and industry.
9. Which accounting method recognizes revenue when it is earned
and expenses when they are incurred, rather than necessarily when
cash changes hands?
4
LICENSING BOARD GENERAL
CONTRACTOR BUSINESS AND FINANCE
EXAM WITH QUESTIONS AND VERIFIED
ANSWERS, PLUS DETAILED
RATIONALES/EXPERT VERIFIED FOR
GUARANTEED PASS 2026/LATEST
UPDATE/INSTANT DOWNLOAD PDF
1. A Florida general contractor is preparing a bid for a project. The
estimated direct costs are $420,000, overhead allocated to the
project is $55,000, and the contractor wants a gross profit of
$75,000. What should the contractor's bid price be?
A. $495,000
B. $550,000
C. $575,000
D. $625,000
Answer: C. $550,000
Rationale: The total cost before profit is $420,000 + $55,000 =
$475,000. Adding the desired $75,000 profit produces a bid of
$550,000. A contractor must distinguish direct costs, allocated
overhead, and desired profit when establishing a selling price.
2. A contractor purchases materials for $80,000. The supplier offers a
2% discount if the invoice is paid within the specified discount
period. If the contractor pays within that period, how much is
saved?
1
,A. $800
B. $1,200
C. $1,600
D. $2,000
Answer: C. $1,600
Rationale: The discount is calculated as $80,000 × 0.02 = $1,600. The
contractor would therefore pay $78,400. Taking legitimate supplier
discounts can reduce job costs and improve project profitability.
3. A contractor's current assets are $600,000 and current liabilities are
$400,000. What is the company's current ratio?
A. 0.67:1
B. 1.0:1
C. 1.5:1
D. 2.0:1
Answer: C. 1.5:1
Rationale: The current ratio is calculated as current assets ÷ current
liabilities. Thus, $600,000 ÷ $400,000 = 1.5. A ratio above 1 generally
indicates that current assets exceed current liabilities, although the
adequacy of the ratio depends on the company's circumstances and
industry.
4. Which financial statement primarily reports a company's revenues,
expenses, and resulting net income or loss for a specific accounting
period?
A. Balance sheet
B. Income statement
C. Statement of cash flows
D. Accounts receivable aging report
Answer: B. Income statement
2
,Rationale: The income statement measures operating performance
over a period by reporting revenues and expenses and determining the
resulting profit or loss. The balance sheet reports financial position at
a particular date, while the cash-flow statement focuses on cash
movements.
5. A contractor has total assets of $1,200,000 and total liabilities of
$750,000. What is the owner's equity?
A. $350,000
B. $450,000
C. $750,000
D. $1,950,000
Answer: B. $450,000
Rationale: The fundamental accounting equation is Assets =
Liabilities + Equity. Therefore, Equity = Assets − Liabilities =
$1,200,000 − $750,000 = $450,000.
6. A contractor estimates a project's direct labor at $125,000 and
direct materials at $225,000. Equipment and subcontractor costs
total $75,000. What are the project's direct costs before overhead?
A. $300,000
B. $350,000
C. $425,000
D. $500,000
Answer: C. $425,000
Rationale: Direct costs are costs that can reasonably be traced to the
particular project. Here, $125,000 + $225,000 + $75,000 = $425,000.
General administrative expenses that support the business as a whole
would ordinarily be treated as overhead rather than direct job costs.
3
, 7. A contractor has annual overhead of $240,000 and expects to
perform $1,200,000 in annual direct construction work. Using a
direct-cost-based allocation, what overhead rate should be applied?
A. 10%
B. 15%
C. 20%
D. 25%
Answer: C. 20%
Rationale: The overhead rate is $240,000 ÷ $1,200,000 = 0.20, or 20%.
Applying an appropriate overhead allocation is important because
recovering only direct job costs without recovering operating expenses
can cause apparently profitable projects to produce an overall business
loss.
8. A contractor has an accounts receivable balance of $300,000.
During the year, credit sales were $1,800,000. What is the
approximate receivables turnover ratio using the ending
receivables balance as the simplified denominator?
A. 3 times
B. 4 times
C. 6 times
D. 9 times
Answer: C. 6 times
Rationale: Using the simplified calculation, receivables turnover =
credit sales ÷ receivables = $1,800,000 ÷ $300,000 = 6 times. A higher
turnover generally indicates faster collection, although the appropriate
benchmark varies by company and industry.
9. Which accounting method recognizes revenue when it is earned
and expenses when they are incurred, rather than necessarily when
cash changes hands?
4
