Solution Manual
Construction Accounting And Financial Management,
4th Edition Steven J. Peterson
Chapters 1 - 18, Complete Newest Version
, Contents
New To The Fourth Edition 1
Chapter 1: Construction Financial Management 2
Chapter 2: Construction Accounting Systems 4
Chapter 3: Accounting Transactions 7
Chapter 4: More Construction Accounting 23
Chapter 5: Depreciation 34
Chapter 6: Analysis Of Financial Statements 50
Chapter 7: Managing Costs 58
Chapter 8: Determining Labor Burden 62
Chapter 9: Managing General Overhead Costs 65
Chapter 10: Setting Profit Margins For Bidding 67
Chapter 11: Profit Center Analysis 70
Chapter 12: Cash Flows For Construction Projects 75
Chapter 13: Projecting Income Taxes 87
Chapter 14: Cash Flows For A Construction Company 91
Chapter 15: Time Value Of Money 93
Chapter 16: Financing A Company’s Financial Needs 99
Chapter 17: Making Financial Decisions 111
Chapter 18: Income Taxes And Financial Decisions 130
, Chapter 1: Construction Financial Management
Learning Objectives
At The Completion Of This Chapter The Student Should Be Able To:
Explain Why Financial Management Is So Important To A Construction
Company.
Explain Why Financial Management Is Different For Construction
Companies Than ForMost Other Industries.
Understand That All Managerial Employees From The Owner To The
Crew Foreperson Play A Role In Financial Management Of A
Construction Company.
Instructional Hints
Compare A Construction Company To A Manufacturing Plant.
Emphasize The Differences Between A Construction Company And A
Manufacturing Plant, Particularly: Construction Companies Build
Unique Products And The Equipment Is Not Usually Stationary At
Single Location. These Are The Reasons A Construction Company
Needs A Job Cost System And An Equipment Cost System.
Activities
Invite A Financial Manager (For Example, An Accountant Or General
Manager) From A Construction Company To Your Class To Discuss
Their Role As A Financial Manager.
Have Each Student Interview A Management Employee For A
Construction Company. The Interviews Should Include Owners, Project
Managers, Superintendents, And Forepersons. Each Student Is To
Find Out How The Employee Contributes To The Financial
Management Of The Company. Discuss Their Findings In Class.
Instruction Resources
The Figures From This Chapter In Electronic Format And
Powerpoint Slides Can Be Found At The Instructor’s Website.
Data On Construction Failures Can Be Obtained From The Surety
Information Office (Www.Sio.Org).
Current Data On Construction Company Failures Can Be Found At
Http://Www.Census.Gov/Ces/Dataproducts/Bds/Data_Firm.Html. The
, Most Useful Data Comes From Reports That Include The Sector (E.G.,
Sector, Firm Age By Sector, And Firm Size By Sector) Because
Construction Can Be Separated From Other Industries.
Solutions To The Textbook Problems
1. They Are: 1) Ineffective Financial Management Systems, 2) Bank
Line Of Credits Constantly Borrowed To The Limits, 3) Poor
Estimating And/Or Job Cost Reporting,
4) Poor Project Management, And 5) No Comprehensive Business Plan.
2. Anyone Who Controls Financial Resources (Cash, Materials, Labor, And
Equipment) Including: Owners, General Managers, Project Managers,
Estimators, Superintendents, And Crew Forepersons.
3. The Way Construction Companies Do Business Is Very Different Than
Most Companies. The Reasons For This Include: 1) For Many
Construction Companies, Their Entire Product Consists Of One Of A Kind
Construction Projects; 2) Their Projects Occurs At Different Locations
Each Time; 3) They Receive Progress Payments From Which Retention Is
Withheld; And 4) They Rely Heavily On Subcontractors To Perform The
Work.
4. Accounting For Financial Resources Include: 1) Tracking Project And
General Overhead Costs, 2) Ensuring That A Proper Construction
Accounting System Has Been Set Up And Is Operating Properly, 3)
Tracking Committed Costs And Projecting The Project Costs At
Completion, 4) Calculating Under And Over Billings, 5) Preparing
Financial Statements, And 6) Managing The Company’s Finances So That
The Financial Ratios Are In Line With The Rest Of The Industry.
5. Managing Costs And Profits Include: 1) Controlling Project Costs, 2)
Monitoring And Projecting Profitability, 3) Setting And Managing Labor
Burden Markups, 4) Managing Overhead, 5) Setting Profit Margins, And
6) Monitor The Profitability Of Individual Customers.
6. Managing Cash Flows Include: 1) Matching The Use Of Subcontractor
And In-House Labor To Available Cash, 2) Making Sure That
Sufficient Cash Is Available To Take On Additional Projects, 3)
Preparing Income Tax Projections, 4) Preparing Annual Cash Flow
Projections, And 5) Arranging For Financing.
7. Construction Managers Must Select Where To Invest The Company’s
Resources And Select The Most Economical Construction Equipment
To Use.
8. The Answer To This Question Will Vary From Student To Student.
Construction Accounting And Financial Management,
4th Edition Steven J. Peterson
Chapters 1 - 18, Complete Newest Version
, Contents
New To The Fourth Edition 1
Chapter 1: Construction Financial Management 2
Chapter 2: Construction Accounting Systems 4
Chapter 3: Accounting Transactions 7
Chapter 4: More Construction Accounting 23
Chapter 5: Depreciation 34
Chapter 6: Analysis Of Financial Statements 50
Chapter 7: Managing Costs 58
Chapter 8: Determining Labor Burden 62
Chapter 9: Managing General Overhead Costs 65
Chapter 10: Setting Profit Margins For Bidding 67
Chapter 11: Profit Center Analysis 70
Chapter 12: Cash Flows For Construction Projects 75
Chapter 13: Projecting Income Taxes 87
Chapter 14: Cash Flows For A Construction Company 91
Chapter 15: Time Value Of Money 93
Chapter 16: Financing A Company’s Financial Needs 99
Chapter 17: Making Financial Decisions 111
Chapter 18: Income Taxes And Financial Decisions 130
, Chapter 1: Construction Financial Management
Learning Objectives
At The Completion Of This Chapter The Student Should Be Able To:
Explain Why Financial Management Is So Important To A Construction
Company.
Explain Why Financial Management Is Different For Construction
Companies Than ForMost Other Industries.
Understand That All Managerial Employees From The Owner To The
Crew Foreperson Play A Role In Financial Management Of A
Construction Company.
Instructional Hints
Compare A Construction Company To A Manufacturing Plant.
Emphasize The Differences Between A Construction Company And A
Manufacturing Plant, Particularly: Construction Companies Build
Unique Products And The Equipment Is Not Usually Stationary At
Single Location. These Are The Reasons A Construction Company
Needs A Job Cost System And An Equipment Cost System.
Activities
Invite A Financial Manager (For Example, An Accountant Or General
Manager) From A Construction Company To Your Class To Discuss
Their Role As A Financial Manager.
Have Each Student Interview A Management Employee For A
Construction Company. The Interviews Should Include Owners, Project
Managers, Superintendents, And Forepersons. Each Student Is To
Find Out How The Employee Contributes To The Financial
Management Of The Company. Discuss Their Findings In Class.
Instruction Resources
The Figures From This Chapter In Electronic Format And
Powerpoint Slides Can Be Found At The Instructor’s Website.
Data On Construction Failures Can Be Obtained From The Surety
Information Office (Www.Sio.Org).
Current Data On Construction Company Failures Can Be Found At
Http://Www.Census.Gov/Ces/Dataproducts/Bds/Data_Firm.Html. The
, Most Useful Data Comes From Reports That Include The Sector (E.G.,
Sector, Firm Age By Sector, And Firm Size By Sector) Because
Construction Can Be Separated From Other Industries.
Solutions To The Textbook Problems
1. They Are: 1) Ineffective Financial Management Systems, 2) Bank
Line Of Credits Constantly Borrowed To The Limits, 3) Poor
Estimating And/Or Job Cost Reporting,
4) Poor Project Management, And 5) No Comprehensive Business Plan.
2. Anyone Who Controls Financial Resources (Cash, Materials, Labor, And
Equipment) Including: Owners, General Managers, Project Managers,
Estimators, Superintendents, And Crew Forepersons.
3. The Way Construction Companies Do Business Is Very Different Than
Most Companies. The Reasons For This Include: 1) For Many
Construction Companies, Their Entire Product Consists Of One Of A Kind
Construction Projects; 2) Their Projects Occurs At Different Locations
Each Time; 3) They Receive Progress Payments From Which Retention Is
Withheld; And 4) They Rely Heavily On Subcontractors To Perform The
Work.
4. Accounting For Financial Resources Include: 1) Tracking Project And
General Overhead Costs, 2) Ensuring That A Proper Construction
Accounting System Has Been Set Up And Is Operating Properly, 3)
Tracking Committed Costs And Projecting The Project Costs At
Completion, 4) Calculating Under And Over Billings, 5) Preparing
Financial Statements, And 6) Managing The Company’s Finances So That
The Financial Ratios Are In Line With The Rest Of The Industry.
5. Managing Costs And Profits Include: 1) Controlling Project Costs, 2)
Monitoring And Projecting Profitability, 3) Setting And Managing Labor
Burden Markups, 4) Managing Overhead, 5) Setting Profit Margins, And
6) Monitor The Profitability Of Individual Customers.
6. Managing Cash Flows Include: 1) Matching The Use Of Subcontractor
And In-House Labor To Available Cash, 2) Making Sure That
Sufficient Cash Is Available To Take On Additional Projects, 3)
Preparing Income Tax Projections, 4) Preparing Annual Cash Flow
Projections, And 5) Arranging For Financing.
7. Construction Managers Must Select Where To Invest The Company’s
Resources And Select The Most Economical Construction Equipment
To Use.
8. The Answer To This Question Will Vary From Student To Student.
