AFSB Ch.3 Study Questions/ Vocab
questions well answered
A contractor's percentage-of-completion estimates - correct answer ✔✔ Are based on the
contractor's ability to estimate the cost to complete the project and recognize income and profit
as they accrue during the project.
Which one of the following contractor's assets would encourage a surety to underwrite contract
bonds for the contractor or to extend a line of credit for bonding? - correct answer ✔✔ Quality
stocks and bonds and accounts receivable
Which one of these statements is true regarding the surety producer's role in a bonding
relationship? - correct answer ✔✔ The producer assists the contractor and the underwriter in
the bond application and analyses; when the bond or credit line is approved by the underwriter,
the producer assists with communication and continues as an integral part of the contractor's
management team.
When selecting a surety company for a bonding relationship with a contractor, - correct answer
✔✔ The producer should consider the surety's suitability factors to the contractor's needs,
including the surety's philosophies, financial capacity, stability, and comfort with the projects
A pre-set surety bond credit limit - correct answer ✔✔ Eliminates the need to reevaluate the
contractor's need for every bond.
A pre-set credit line has which one of these benefits? - correct answer ✔✔ The limit enables the
surety producer to service the contractor's normal bond needs more effectively and within the
terms and conditions of the credit line.
, Which one of these statements regarding bids is true? - correct answer ✔✔ Usually, at least
thirty days elapse from bid opening to contract award
A surety bond credit line covers the contractor's normal, anticipated bond needs. If a special
situation develops that would cause a contractor to exceed the credit line, then - correct answer
✔✔ The contractor and the producer should discuss the merits of the case with the underwriter
to determine the desirability of an increased credit line.
To reach a reasonable rate of return for their bond risks, - correct answer ✔✔ Sureties pay
competent underwriters and agents competitive salaries and commissions.
Which one of the following statements is true regarding surety producers' promotion? - correct
answer ✔✔ Participating in professional seminars and construction industry associations is an
excellent way to communicate to a target audience.
The most effective and credible form of promotion for surety producers is - correct answer ✔✔
Word-of-mouth advertising and referrals from the producer's satisfied clients.
Which one of the following is a factor of marketing that requires the surety producer to have
education, training, knowledge, skill, and organization to provide professional service that
clients need? - correct answer ✔✔ Product
Each one of the following steps is performed toward the beginning of the development of a
contract surety business plan EXCEPT: - correct answer ✔✔ Change goals and action steps as
the agency's strengths and market conditions change
When developing one aspect of the business plan, the planning group should consider their
agency's philosophy and culture, management quality and commitment, team motivation and
dedication, resources, and the continuity of ownership and management. Which one of the
following describes this aspect of the planning process? - correct answer ✔✔ Identify the
agency's strengths and weaknesses
questions well answered
A contractor's percentage-of-completion estimates - correct answer ✔✔ Are based on the
contractor's ability to estimate the cost to complete the project and recognize income and profit
as they accrue during the project.
Which one of the following contractor's assets would encourage a surety to underwrite contract
bonds for the contractor or to extend a line of credit for bonding? - correct answer ✔✔ Quality
stocks and bonds and accounts receivable
Which one of these statements is true regarding the surety producer's role in a bonding
relationship? - correct answer ✔✔ The producer assists the contractor and the underwriter in
the bond application and analyses; when the bond or credit line is approved by the underwriter,
the producer assists with communication and continues as an integral part of the contractor's
management team.
When selecting a surety company for a bonding relationship with a contractor, - correct answer
✔✔ The producer should consider the surety's suitability factors to the contractor's needs,
including the surety's philosophies, financial capacity, stability, and comfort with the projects
A pre-set surety bond credit limit - correct answer ✔✔ Eliminates the need to reevaluate the
contractor's need for every bond.
A pre-set credit line has which one of these benefits? - correct answer ✔✔ The limit enables the
surety producer to service the contractor's normal bond needs more effectively and within the
terms and conditions of the credit line.
, Which one of these statements regarding bids is true? - correct answer ✔✔ Usually, at least
thirty days elapse from bid opening to contract award
A surety bond credit line covers the contractor's normal, anticipated bond needs. If a special
situation develops that would cause a contractor to exceed the credit line, then - correct answer
✔✔ The contractor and the producer should discuss the merits of the case with the underwriter
to determine the desirability of an increased credit line.
To reach a reasonable rate of return for their bond risks, - correct answer ✔✔ Sureties pay
competent underwriters and agents competitive salaries and commissions.
Which one of the following statements is true regarding surety producers' promotion? - correct
answer ✔✔ Participating in professional seminars and construction industry associations is an
excellent way to communicate to a target audience.
The most effective and credible form of promotion for surety producers is - correct answer ✔✔
Word-of-mouth advertising and referrals from the producer's satisfied clients.
Which one of the following is a factor of marketing that requires the surety producer to have
education, training, knowledge, skill, and organization to provide professional service that
clients need? - correct answer ✔✔ Product
Each one of the following steps is performed toward the beginning of the development of a
contract surety business plan EXCEPT: - correct answer ✔✔ Change goals and action steps as
the agency's strengths and market conditions change
When developing one aspect of the business plan, the planning group should consider their
agency's philosophy and culture, management quality and commitment, team motivation and
dedication, resources, and the continuity of ownership and management. Which one of the
following describes this aspect of the planning process? - correct answer ✔✔ Identify the
agency's strengths and weaknesses
