by Daniel W. Halpin
Financial Management and Accounting Fundamentals for Construction is a compact summary of the basic financial skills that a construction professional must have to be successful in the management of a construction company and its projects.
Topics include:
- How to organize and use a company's financial reports
- What amount of cash must be made available to the contractor to complete a project
- Why the early payment of supplier invoices can enhance profitability
- How to quantify the time value of money in financial decisions
- What tax amount is owed by a company and how it impacts the bottom line
- How to control project costs
- What financial sources are available to a construction contractor for capital expansion
In Financial Management and Accounting Fundamentals for Construction, the reader will learn about accounting fundamentals, project-related financial matters, and company level financial issues—three factors that are key to career success.
Contents
- The Big Paradox
- What is Financial Management?
- Project-Level Controls
- Time value of money
- Entrepreneurial Issues
Understanding Financial Statements
- Generally Accepted Accounting Principles
- Cash and accrual bases: Two ways to look at accounting
- Cash Basis of Accounting
- Accrual Basis of Accounting
- Accounts
- Account Hierarchy
- Financial Reports
- Bookkeeping
- The Balance Sheet
- Balance Sheet layout
- Balance Sheet Account Categories in Detail
- The Fundamental Accounting Equation
- Asset Values
- The Fundamental Equation and Owners’ Risk
- Balance Sheet for Fudd Associates, Inc.
- Key Accounts
- The Income Statement
- Revisiting the Airport Screen
- Components of an Income Statement - More Details
- The Babel Tower of Accounting
- The Statement of Cash Flows
- Contract Backlog
- Public Corporations
Analyzing Company Financial Data
- Vertical Analysis: Financial Ratios
- Liquidity Indicators: Can this company get cash in a hurry?
- Profitability Indicators: Is this company making enough profit?
- Efficiency Indicators: How long does it take a company to turn over its money?
- Capital Structure Indicators: How committed are the owners?
- Other Indicators
- Asset Newness
- Horizontal Analysis: Tracking Financial Trends
- Time Series Graphs
Accounting Basics
- Transaction Processing
- Posting entries to the ledger
- Relationship of work- in-progress and revenue/expense accounts
- Closing the accounting cycle
- Recognition of income
- Transactions during a period
- Posting to the general ledger during the accounting period
- Closing actions at the end of the period
Project-Level Cost Control
- Objectives of Project-level Cost Control in Construction
- Unique Aspects of Construction Cost Control
- Types of Costs
- The Construction Estimate
- Cost Control System
- Building a Cost Control System
- Cost Accounts
- Cost Account Structure
- Project Cost Code Structure
- Cost Accounts for Integrated Project Management
- Earned Value Analysis
- Labor Data Cost Collection
- Charges for Indirect and Overhead Expense
Forecasting Financial Needs
- Importance of Cash Management
- Understanding cash flow
- Retainage
- Project cost, value and cash profiles
- Cash Flow Calculation -A Simple Example
- Peak Financial Requirements
- Getting Help from the Owner
- Optimizing Cash Flow
- Developing a Project Cash flow Estimate
- Using software for cash flow computations
- Company-level cash flow planning
- Strategic cash flow management: "Cash Farming"
- Project and General Overhead
- Fixed Overhead
- Considerations in Establishing Fixed Overhead
- Breakeven Analysis
- Basic Relationships Governing the Breakeven Point
Time Value of Money and Evaluating Investments
- Time value of money
- Interest
- Simple and compound interest
- Nominal and effective rate
- Equivalence and MARR
- Discount Rate
- Importance of Equivalence
- Inflation
- Sunk Costs
- Cash flow diagrams
- Annuities
- Conditions for Annuity Calculations
- Calculating the Future Value of a Series of Payments
- Summary of equivalence formulas
- Worth Analysis Techniques: An Overview
- Present Worth Analysis
- Investments with different life spans
- Equivalent Annual Worth (EAW)
- Recovering investment capital
- Internal Rate of Return
- A Practical Example Using PW Analysis
- Comparison Using EAW
- An IRR Example - Owner Financing Using Bonds
Construction Loans and Credit
- The Construction Financing Process
- An Example Developmental Project
- The Amount of the Loan
- How is the Cap Rate Determined?
- Mortgage Loan Commitment
- Construction Loan
- Lines of Credit
- Interest Paid on outstanding balance
- Commitment fees
- Compensating balances
- Clean-up requirement
- Collaterals
- Accounts Receivable Financing
- Trade Credits
- Long Term Financing
- Loans with end-of term balloon payments
The Impact of Taxes
- Types of taxes
- Income Tax Systems
- Alternatives for company legal organization
- Taxable Income: corporations
- Taxable income: individuals
- Itemized deductions, standard deductions and personal exemptions
- The Tax Significance of Depreciation
- Calculating Depreciation
- Straight-Line Method
- The Production Method
- Depreciation Based on Current Law
- Marginal Tax Rates
- Tax credits
- Tax payroll Withholding
- Tax payment schedules
- Marginal, average and effective tax rates
- Net Operating Losses
- Taxes on dividends and long-term capital gains
- Alternative Minimum Tax
Appendices
- Typical Chart of Accounts
- Further Illustrations of Transactions
- Compound Interest Tables
Index
to see books of related interest