2.1.4 Financial Management

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Which financial system records all income and expenses as they occur in the general ledger?

Balance sheet system

Statement of income and expenses system

Cash system

Accrual system (correct)

What does a statement of income and expenses provide?

A summary of income, expenses, and profit or loss (correct)

A summary of profit or loss only

A summary of expenses only

A summary of income only

What does a balance sheet indicate?

Liabilities and debts only

Assets, equity position, liabilities, and debts (correct)

Assets and equity position only

Profit margins and loan commitments

What should an architect establish when engaging an accountant?

The services to be provided, financial reports, and professional fee Signup and view all the answers

According to the text, what is the purpose of setting aside a percentage of the profit as a capital reserve?

To build a successful financial history for borrowing funds Signup and view all the answers

What are some factors that should be considered in determining the distribution of bonuses to staff?

Ability and professional growth Signup and view all the answers

In 'lean' years, what may happen to the capital reserve?

It may be very little or non-existent Signup and view all the answers

What is the purpose of proper tax planning in relation to profit withdrawal from the practice?

To reduce the amount of profit withdrawn Signup and view all the answers

Which type of accounting is done within the architectural practice, often by staff or a bookkeeper?

Internal accounting Signup and view all the answers

What should the financial plan of an architectural practice include?

All of the above Signup and view all the answers

What is the purpose of short-term financial planning, usually called budgeting?

To project income and expenses for a 12-month period Signup and view all the answers

What is an audit in the context of accounting?

An independent and objective examination of accounting records Signup and view all the answers

Which of the following factors may lead to inadequate profit margins for an architectural practice?

Poor management of the project Signup and view all the answers

What does the multiplier in the billing rate formula represent?

The profit margin of the practice Signup and view all the answers

How can the number of billable hours in a year be determined?

Multiply regular daily hours by 365 days Signup and view all the answers

What is the utilization factor?

The percentage of billable hours as compared to the total hours of work in a year Signup and view all the answers

According to the text, when is the best time to negotiate for a line of credit with a bank?

When funds for the operation of the practice are not required Signup and view all the answers

According to the text, what is the prime rate?

The fluctuating rate that banks charge their best customers Signup and view all the answers

According to the text, what information should the architect provide to the bank when borrowing funds?

Both complete records of past performance and detailed budgets and long-range financial plans Signup and view all the answers

According to the text, what should the architect do when determining fees for services?

All of the above Signup and view all the answers

Which of the following is NOT a reason why a profit is required in a practice?

To pay out retiring or dismissed employees Signup and view all the answers

According to the text, how should the distribution of bonuses to staff be determined?

Based on both the practice's established policy and factors determined in a performance review Signup and view all the answers

When the practice is owned by shareholders or partners who have invested capital, how should their investment earn interest?

At the bank's prime rate of interest plus an additional percentage Signup and view all the answers

According to the text, what are some factors that should be considered in a performance review?

Ability, productivity, and professional growth Signup and view all the answers

What is the purpose of building a successful financial history in a practice?

To borrow funds Signup and view all the answers

True or false: The purpose of building a successful financial history in a practice is to attract potential clients and investors.

False Signup and view all the answers

True or false: The distribution of bonuses to staff should be solely based on their productivity.

False Signup and view all the answers

True or false: The investment of shareholders or partners in the practice should earn interest at the bank's prime rate of interest.

True Signup and view all the answers

True or false: Financial planning in an architectural practice should include short-term budgeting only.

False Signup and view all the answers

True or false: The prime rate is the interest rate at which banks lend to their most creditworthy customers.

True Signup and view all the answers

2.1.4 Financial Management

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Questions and Answers

Which financial system records all income and expenses as they occur in the general ledger?

What does a statement of income and expenses provide?

What does a balance sheet indicate?

What should an architect establish when engaging an accountant?

According to the text, what is the purpose of setting aside a percentage of the profit as a capital reserve?

What are some factors that should be considered in determining the distribution of bonuses to staff?

In 'lean' years, what may happen to the capital reserve?

What is the purpose of proper tax planning in relation to profit withdrawal from the practice?

Which type of accounting is done within the architectural practice, often by staff or a bookkeeper?

What should the financial plan of an architectural practice include?

What is the purpose of short-term financial planning, usually called budgeting?

What is an audit in the context of accounting?

Which of the following factors may lead to inadequate profit margins for an architectural practice?

What does the multiplier in the billing rate formula represent?

How can the number of billable hours in a year be determined?

What is the utilization factor?

According to the text, when is the best time to negotiate for a line of credit with a bank?

According to the text, what is the prime rate?

According to the text, what information should the architect provide to the bank when borrowing funds?

According to the text, what should the architect do when determining fees for services?

Which of the following is NOT a reason why a profit is required in a practice?

According to the text, how should the distribution of bonuses to staff be determined?

When the practice is owned by shareholders or partners who have invested capital, how should their investment earn interest?

According to the text, what are some factors that should be considered in a performance review?

What is the purpose of building a successful financial history in a practice?

True or false: The purpose of building a successful financial history in a practice is to attract potential clients and investors.

True or false: The distribution of bonuses to staff should be solely based on their productivity.

True or false: The investment of shareholders or partners in the practice should earn interest at the bank's prime rate of interest.

True or false: Financial planning in an architectural practice should include short-term budgeting only.

True or false: The prime rate is the interest rate at which banks lend to their most creditworthy customers.

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