PcM 409-418 HARD FINC CALC
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Questions and Answers

According to the information provided, what is the primary determinant of the ultimate health of the architecture industry?

  • The growth of the construction industry (correct)
  • The financial condition of architecture firms
  • The staff employed by architecture firms
  • The design activity cycles
  • What has been the average yearly addition of nonresidential building square feet in the U.S. since 1980?

  • Less than 1 billion square feet
  • 2.6 billion square feet
  • 1.3 billion square feet (correct)
  • 1.3 million square feet
  • What were the construction levels in 2010 and 2011 in comparison to the average yearly addition of nonresidential building square feet since 1980?

  • About half the average (correct)
  • More than double the average
  • Less than one-third of the average
  • Exactly equal to the average
  • What does the text suggest about the prospects for strong growth in the U.S. construction industry?

    <p>Promising, even during cyclical downturns</p> Signup and view all the answers

    What is the main focus of financial management in design firms?

    <p>Monitoring and managing a firm's financial resources</p> Signup and view all the answers

    Which of the following is considered crucial for managing a design firm financially?

    <p>Understanding the Profit-Loss Statement and Balance Sheet</p> Signup and view all the answers

    When should the development of annual budgets and profit plans ideally begin?

    <p>Before the new year</p> Signup and view all the answers

    What distinguishes accrual-basis accounting reports from financial management reports?

    <p>Accrual-basis reports provide a more comprehensive view of a firm's financial situation</p> Signup and view all the answers

    Which of the following is a key term in financial management reports?

    <p>Hourly billing rate</p> Signup and view all the answers

    What is the main purpose of financial management reports?

    <p>Anticipating financial performance and responding to trends</p> Signup and view all the answers

    What is the purpose of the Mattox Format?

    <p>To assess profitability and performance of professional design firms</p> Signup and view all the answers

    Which components are included in the Mattox Format's profit-loss statement?

    <p>Revenue, direct labor, indirect expenses, and miscellaneous revenue/expenses</p> Signup and view all the answers

    What are some of the key financial performance indicators provided by the Mattox Format?

    <p>Net profit, true overhead rate, and five others</p> Signup and view all the answers

    Why should professional design firms establish specific financial performance goals?

    <p>Based on current financial status and market conditions</p> Signup and view all the answers

    How can a realistic net billing and revenue projection goal be established within the profit plan?

    <p>By identifying current projects under contract and outstanding project proposals</p> Signup and view all the answers

    What does a firm's total revenue in the Mattox Format include?

    <p>Project consultant fees and miscellaneous revenue/expenses</p> Signup and view all the answers

    What type of businesses typically use cash-basis profit-loss reports?

    <p>Small businesses without employees</p> Signup and view all the answers

    What does a cash-basis report not reflect?

    <p>The timing correlation between income and expenses</p> Signup and view all the answers

    What do accrual-basis reports consider?

    <p>The invoices sent to clients for monthly revenue earnings</p> Signup and view all the answers

    What does the accrual-basis profit-loss statement establish?

    <p>Net profit for a firm</p> Signup and view all the answers

    Why are both cash-basis and accrual-basis reports important for financial management?

    <p>To indicate cash flow management effectiveness and tax liability</p> Signup and view all the answers

    What does the modified accrual-basis report record?

    <p>Only the revenue from invoiced fees and expenses</p> Signup and view all the answers

    What is important to maintain to ensure timely net profit distributions?

    <p>A healthy cash-on-hand balance</p> Signup and view all the answers

    What do conventional accounting formats not facilitate easy calculation of?

    <p>Revenue from invoiced fees and expenses</p> Signup and view all the answers

    'Who' are responsible for reviewing and monitoring financial data?

    <p>'Firm leaders' are responsible for reviewing and monitoring financial data.</p> Signup and view all the answers

    What does the cash-basis report do for tax liability calculations?

    <p>Indicates cash flow management effectiveness and tax liability.</p> Signup and view all the answers

    Study Notes

    • The text discusses the differences between cash-basis and accrual-basis profit-loss reports.
    • Cash-basis reports are used by small businesses without employees and indicate only the income received and expenses paid within a specific accounting period.
    • Cash-basis reports do not reflect the timing correlation between income and expenses.
    • Accrual-basis reports, on the other hand, do not consider the actual receipt or payment of money.
    • Accrual-basis reports reflect the invoices sent to clients for monthly revenue earnings based on hours worked and expenses incurred.
    • The accrual-basis profit-loss statement establishes the net profit for a firm and the calculation of seven key financial performance indicators.
    • Both cash-basis and accrual-basis reports are important for financial management.
    • The cash-basis report indicates cash flow management effectiveness and tax liability, while the accrual-basis report indicates net profit.
    • The modified accrual-basis report records only the revenue from invoiced fees and expenses.
    • It is important to maintain a healthy cash-on-hand balance to ensure timely net profit distributions.
    • Conventional accounting formats do not facilitate easy calculation of financial performance indicators, and the Mattox format is an alternative for easy understanding of financial performance indicators.
    • Firm leaders are responsible for reviewing and monitoring financial data, and both accounting and financial reports are needed for sound business decisions.
    • The cash-basis report and modified accrual-basis report are different and should not be compared directly.
    • The cash-basis report is used for tax liability calculations, while the modified accrual-basis report provides an accurate snapshot of a given accounting period.

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    Description

    Test your knowledge of cash-basis and accrual-basis reports and their applications in financial planning. Understand the differences between the two and when each might be used in a firm.

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