Application of Professional Ethics, and Business Practices - Part I Flashcards
Occasionally, a designer will have to ______ _______ as a result of shoddy work.
take action
In the event that a designer notices work that does not conform to the contract documents during a visit, the designer may ______________.
recommend to the owner that the work be rejected
The designer does not have the right to reject work, but can authorize _______ ________ or ______ to determine if work that has been done is in conformance with contract documents.
special instructions
tests
The designer can also recommend the payment be ________, if work is ________, _________, or if the contractor has violated the terms of his or her contract.
withheld
defective
incomplete
In some cases, a designer will need to take unusual actions as a result of __________ or ______ _________ by a contractor.
negligence
poor conduct
The designer has the right to withhold a portion or all of an ___________ for ________ for any of the following reasons. (See next cards)
application for payment
Reason 1: He or she cannot ______ the amount of work that has been done.
verify
Reason 2: some of the work is ________.
defective
Reason 3: ______-_______ claims have been made, or are likely to be made.
third-party
Reason 4: The contractor has not made payments to ___________ or __________.
subcontractors or suppliers
Reason 5: there is reasonable evidence that the work cannot be completed for the ______ balance of the ________ ______.
unpaid balance of the contract sum
Reason 6: The owner or another contractor has been _______.
damaged
There is reasonable evidence that the work will not be ____________ or the contractor has ___________ ________ to carry out work in accordance with the contract documents.
completed on time
consistently failed
Occasionally, a designer will have to withhold _______ from a contractor with the _________ of the owner or client.
payment
permission
The common reasons for a designer to withhold payment to a contractor are _______ work; failure to ____ subcontractors; damage to the _______ property; _____-______ claims; indications that the work will not ________________ or failure to meet the standards set by the ________ _________.
defective
pay
owners
third-party
be completed on time
contract documents
The occasional necessity of withholding payment reinforces the importance of ________, which can be used to force a contractor to consider the validity of an owners claim.
retainage
What is the simplest type of business structure?
Sole proprietorship
A ______ _________ is a business structure in which the company is owned by an individual and operates under his/her name or a company name.
Sole proprietorship
Sole proprietorships can be set up simply by establishing ___________________.
establishing a name and location, opening a company bank account, and having company stationary printed
List three benefits to sole proprietorships.
- They are easy to establish
- They allow total management control by the owner
- Have tax advantages (expenses and losses can be deducted from gross income)
List, two disadvantages of a sole proprietorship.
The owner is personally liable for all the debts and losses of the company.
It is more difficult to raise capital and establish credit for a sole proprietorship.
A business arrangement in which two or more individuals share in the management, profits and risks of the business.
Partnership
The members of the partnership have their income taxed as _________ ________ on personal tax forms.
ordinary income
Partnerships are relatively easy to form; however, all the partners are _________________.
liable for the actions of each other
A ___________ spreads work among several owners, and allows different owners to handle their __________.
partnership
specialties
A partnership can _____ additional ________ as necessary.
hire
employees
One common permutation is the limited partnership, in which there are both _________ _________, who participate in the operations of the business and _______ ________, who simply invest money in it.
general partners
limited partners
An association of individuals that has an existence independence from the members.
Corporation
A corporation is formed by ______ appropriate __________ with the state office.
filing
paperwork
Corporations are assumed to be ________ and ______ independent from stockholders.
financially
legally
If a corporation is sued; the personal assets of the stockholders _________.
cannot be pursued
Corporations are generally taxed at a ________ ______, and have _________ independent of changes in stockholders.
lower rate
continuity
Is it easy to raise capital in a corporation?
Yes, relatively easy by selling stock in a corporation.
Disadvantages of a corporation
high initial cost and requires ongoing paperwork and formal requirements in order to maintain the business.
What are two common subcategories of corporations?
Subchapter S corporation and the professional corporation
A subchapter S corporation has certain eligibility requirements, but offers _____________ of a standard corporation.
all the advantages
What is a standard corporation sometimes referred to as?
C corporation
For a subchapter S corporation, profits or losses are paid or deducted from the stockholders _________ _______ ______ in proportion to the share of stock they hold.
personal income taxes
A professional corporation is similar to other forms of corporation with the exception that liability for malpractice is ______________.
limited to the person responsible
Professional corporations can only be formed by groups of ________ ________, such as the lawyers and doctors.
similar professionals
An arrangement in which there are one or more general partners, and other limited partners.
A limited liability company
What can a limited liability company also be known as?
Limited liability partnership
_______ partners invest in the company, oversee it, and are financially responsible for it; ______ partners simply invest and receive a portion of the profits.
General
limited
Limited partners have no _____________, and are only liable to the extent of their investment.
managing authority
A limited liability company combines the advantages of a _________ and a _________.
partnership
corporation
Joint ventures
limited business arrangements formed for the explicit purpose of achieving a short term goal. Joint ventures are often formed when a couple of interior design firms collaborate on a large project.
An interior designer needs to be familiar with the various ways that _______ for a design project can be acquired.
capital
What is one way to acquire capital?
Through a loan
What are two types of loans?
Secured and unsecured
__________ require collateral in case of non-repayment, while __________ do not require any collateral as a guarantee of payment.
secured loans
unsecured loans
Designers can also pursue ______ ______, which is any funding for a business that comes from investors, i.e., stockholders.
equity capital
________ ________, on the other hand, is funding specifically directed to a start up business.
Venture capital
Finally, an interior design firm might seek funds from an _________ _________, an entrepreneur who invests in Interior Design businesses in part to help support another small business owner.
angel investor
An interior designer needs to understand the various ways that a professional can use _______.
credit
Sometimes an interior design firm will establish a __________ _____ and predict the potential for success.
business plan
Using these financial projections to obtain credit is known as “_______________”.
pursuing a pro forma credit policy
__________ _______, on the other hand, is the acquisition of materials from a supplier on the promise of later payment.
Trade credit
Many fledgling interior design firms, need to use _______ ______ and use their personal belongings as collateral. This is a _____ form of credit, and should only be pursued in cases were subsequent earnings are guaranteed.
trade credit
risky
There are a number of places where an interior designer can acquire _________.
Insurance
To begin with, an interior designer can obtain information from an ___________________ who works with __________ insurance companies to provide the best possible coverage for individual clients.
independent insurance agent
multiple
Exclusive agent
Works with only one insurance company.
An exclusive agent tends to be more _____________ about the plans he or she offers, but do not offer the ______ _________ of an independent agent.
knowledgeable
broad selection
An insurance broker, finally, works at the behest of the __________ _______, and not in the service of any particular _________ ________.
individual client
insurance company
Interior designers typically hold ____________ _________ ____________, which protects the interests of the designer in the event, that some action by the designer results in bodily injury or property damage.
professional liability insurance
What is Professional liability insurance also known as?
Malpractice or errors and omissions insurance
Professional liability insurance also provides coverage in the event of ________ mistakes, _______ specifications and the improper _________ of furniture or fixtures.
drawing, inaccurate, installation
Professional liability insurance is made necessary by the fact that basic liability insurance does not cover damages incurred during __________________.
specialized professional activities
In order to acquire this kind of insurance, an individual has to have ____________ expertise in the profession in question.
acknowledged
Interior designers always carry ____________ __________ _____________, which covers the property damage, personal injury, caused by a designer or employees and other liabilities that occur if contractors or subcontractors, do not have their own insurance.
general liability insurance
This coverage often includes ________ ___________ _________, which provides protection in the event, that a product or installation, completed by a designer or subcontractor, does some injury to the client after the designer or subcontractor, relinquishes possession of the product.
product liability insurance
When does product liability (general liability insurance often includes product liability) insurance become especially valuable?
Product liability insurance may be especially valuable, if a contractor or subcontractor, injures people or property, and does not have his or her own insurance coverage.
What types of insurance do interior designers typically carry?
Property insurance
Personal injury protection insurance
Automobile insurance
Worker’s Compensation insurance
Property insurance covers loss or damage to buildings and its contents due to ______, _______, and _______.
fire, flood, and theft
Personal injury protection insurance protects the designer against potential charges of _______, ________, ___________ or libel.
slander, misrepresentation, defamation of character
Automobile insurance covers the liability and property damage to vehicles, _________, and ______ by the interior design business; may include protection against claims made by employees using their own cars while on business for the company.
owned, and used
Worker’s Compensation insurance is mandatory in all states; protects employees in the event of injuries suffered ________ _______.
during work
Every ______ is required to maintain liability insurance and property insurance for the full insurable value of the work.
owner
Property insurance must be for _____ ________ rather than for specified perils.
all risks
___________ _________ typically protects against damage caused by fire, flood, and vandalism, among other things.
Property insurance
Owners will often purchase additional ______ __________ to cover possibilities, not outlined in the liability insurance policy.
risk insurance
The owner needs to be very careful when purchasing this additional risk insurance to ensure that the policy covers the risks __________ to the given project. This is because risk insurance is _________________.
pertinent
notoriously limited in scope
List claims that contractors must carry insurance to protect against (there are four).
- Worker’s Compensation
- Damages of bodily injury, or death to non-employees
- Personal injury
- Non-work damages (including the destruction of tangible property in damages related to the use of motor vehicles)
Contractors must also have insurance for any portion of the work that is ____________ from the job site or is in ______ to the site.
Stored away
transit
Contractors will typically hold _________ and ___________ __________ insurance, which protects against claims resulting from the contractors actions in the event that an injury occurs after the job is complete, and the contractor has left the site.
products
completed operations
In the _____ accounting method, the only transactions that are documented are those in which cash changes hands.
Cash
Because the cash system of accounting is so simplistic, almost every business uses the ________ accounting method.
accrual
In the accrual method, expenses are listed as they are _______ in revenues are listed as they are _______.
incurred
earned
It makes more sense for a business to use the _________ _________, because there are certain expenses which are inevitably going to have to be paid (e.g., employee salaries), regardless of the fact that they have not been paid yet.
accrual method
A functional business needs to acknowledge its certain upcoming ________ and ________ in order to have a clear financial picture.
expenses
revenues
List four concepts related to profit planning and financial management.
Project progress report
Office earnings report
Aged accounts receivable report
Time analysis report
Project progress report: Indicates the _________ _______ of a design project, including the degree to which it stays within budget
current status
Office earnings report: a financial document that summarizes the earnings of a particular office within a _______ _________.
larger business
Aged accounts receivable report: supplies information about all of the money ______ to a business over a certain ________; Sometimes this document will contain columns for the money owed at several different points for example, after 30 days, 60 days, or 90 days.
owed
future
Time analysis report: a financial document that summarizes ______ and _________ over a certain period of time.
earnings
expenditures
List three different accounting statements that an interior designer should be familiar with.
Balance sheet
Profit and loss statement
Cash flow statement
Balance sheet: documents the assets, debts and investment by owners on a particular date. In order for a balance sheet to be correct, the assets must equal the sum of the ________ and _________ _______.
liabilities
shareholders equity
Lists the revenues, costs, and expenses a business earns, and incurs during a particular fiscal period.
Profit and loss statement
Cash flow statement: indicates the cash _________ by a _________ for operations and investment, as well as the cash spent on operations and investment.
received by a business
Current ratio: a measure of a company’s ability to meet financial ________ in the short term
obligations
How is current ratio calculated?
calculated by dividing current assets by current liabilities
A calculation of the difference between expenditures and earnings before subtracting the amount that will be paid to federal, state, and municipal governments.
Net profit before tax
Calculated as the budgeted yearly total factory overhead costs divided by budgeted yearly activity; businesses calculate this amount, so that they will not be surprised by excessive overhead costs during an individual period.
Pre-determined overhead rate
Measure of a company’s ability to meet its immediate financial obligations with the assets it has on hand; calculated by subtracting inventory from current assets, and then dividing the difference by current liabilities.
Quick ratio
Calculated as revenue divided by the number of employees working directly on a specific project.
Revenue per technical staff
Calculated as revenue divided by number of employees
Revenue per total staff
Also known as the utilization rate; the percentage of time or money spent on direct labor divided by the total time and money spent on direct and indirect labor as well as vacations, holidays, and sick leave
Chargeable ratio
Like any other business, an interior design firm needs to acquire a business license in the relevant __________, so that it can be ________ and ______.
jurisdiction
monitored and taxed
A sales tax license is also known as?
A resale license
What does a sales tax license do?
Sales tax license gives the interior designer the ability to buy furniture at wholesale and sell it at retail.
In addition, some states require that an interior designer have some form of ____________ ___________ in order to practice.
professional licensure
Businesses that have employees must withhold state and federal taxes as per tax law, and must obtain an __________ __________ _______ from the Internal Revenue Service.
employer identification number
There are a few legal issues with which an interior designer should be familiar before beginning practice. ________ is the legal term that describes the relationship in which the designer acts on behalf of the client when meeting and making transactions with a contractor or vendor.
Agency
An _______ is defined as any person who is given the responsibility to act on behalf of another person.
agent
The duties of an interior designer are stated in the terms of the _______, are established in the laws of the ___________ of practice, and are implied by the scenario in which the _________ ___________ is made.
contract
jurisdiction
business arrangement
___________ are all of the obligations an interior designer incurs during the course of business.
Liabilities
All of these obligations (or ____________) must be for filled with currency, goods or services.
Liabilities
_____________ is any behavior which puts another person in danger, either directly or indirectly.
Negligence
An interior designer is considered __________ any time he or she fails to fulfill the implied or stated duties of his or her position.
negligent
________ ______________ is a systematic approach to analyzing the presence of risk and selecting and implementing protective techniques.
Risk management
Interior designers need to minimize ____ whenever possible.
risk
Interior designer should also take steps to avoid exposure to _______-_________ claims.
third-party
This is mainly done through _____________ clauses and through maintaining good communication with contractors and employees.
indemnification
Finally, __________ is the legal right given to a creator to produce and distribute his or her creation exclusively.
copyright
Interior designers try to minimize their exposure to third-party ______ by including indemnification clauses in their _________.
claims
contracts
Indemnification clauses seek to ________ the owner and interior designer of responsibility for any damages, claims, or losses caused by _______ ____________ by individuals or groups with whom the interior designer does not have a contractual relationship.
absolve
poor performance
Indemnification clauses try to protect the owner and designer from claims made due to the negligence of the contractor or __________________________.
anyone working under the aegis (Protection, backing or support) of the contractor
However, in some cases, an interior designer or owner can still be considered liable if it is determined that he or she did not _____ _________ ___________, or failed to provide safe working conditions.
give adequate instructions
In order to maintain a steady business, an interior designer needs to be familiar with the basics of __________.
marketing
One of the basics of marketing is to establish a corporate identity, a _________ and _________ graphic image representing an interior design firm.
distinct and consistent
This logo or image should visually _____________ the __________ of the firm and should support marketing efforts.
communicate, philosophy
Another major strategy of marketing is to develop _______ or ________ of information about a particular _____ who requires the services of the designer now or sometime in the future.
leads or sources
client
Leads can also be planned _________ projects that will need design services.
building
A savvy designer is always on the lookout for _________ that could use his or her services.
projects
Many designers make use of __________, in which a brief description of the firm is given.
brochures
Interior designers use a variety of ______ in their marketing mix.
media
___________ presentations can be used to present a more detailed picture of a firm and its work in the past.
Audiovisual
Audiovisual presentations also can be used to indicate how the design firm might ____________________.
approach a particular problem
___________ are a good way to maintain presence in front of a large audience on a regular basis.
Newsletters
They are a relatively inexpensive method of marketing and should be sent frequently to _____, _______, and _________ clients.
past, present and potential
__________- are an inexpensive and increasingly popular way to make information available to clients.
Websites
Huge amounts of _________ and ________ can be placed on a website at minimum expense.
photography, graphics
Finally many firms make use of traditional advertising, which is defined as any ______ ___________ through the media.
paid communication
______________ always should be designed with a particular audience in mind.
Advertising
In order to compose an effective marketing mix, interior designers need to be familiar with the 4 Ps of marketing. What are they?
Product, price, place and promotion
Product refers to the _______ ___________ of the good or service that is being marketed.
actual characteristics
Actual characteristics of the product can include any ____________ or product _________ that the seller is offering.
warranties
support
_______ is quite simply the amount of money or other currency that must be exchanged for the good or service.
Price
An effective marketer knows what prices will be __________ to his or her clientele.
attractive
Place is the location of the _________ and the _____ that the product will take to the end-user.
product
path
Promotion is the _______ plan for making the product ______ and attractive to the clientele.
seller’s
known
In order to be an effective ________, an interior designer needs to be adept at _________.
marketer
branding
Branding is the process of giving a company or product a ____________ ______ in the market.
recognizable
identity
In order to construct an effective brand, a seller needs to perform _________ _________ to understand the desires and attitudes of the target customer.
market analysis
A new branch of marketing, _______________, uses demography for marketing purposes in order to determine ________, ___________ and habits.
psychographics,
attitudes, preferences
Many marketers perform what is called ______ ___________.
SWOT analysis
SWOT analysis is an evaluation of ________, ___________, ______________ and ________ characteristic of an organization.
strengths, weaknesses, opportunities, and threats
They use SWOT analysis to effectively _______ their product and ______ their audience.
brand
target
Interior designers need to be familiar with the ___________ and ___________ of sales
techniques and etiquette of sales
__________, for instance, is the process of looking for potential business by contacting ____________ firms.
Prospecting,
construction
Cold calling is the process of contacting ___________ businesses at _________ to ask if they need the help of interior designers.
construction, random
_______ __________, is the process of asking for employment with businesses that are known to have an _______ in interior design services.
Warm calling
interest
Obviously, there is a higher success rate with ______ calling than with ______ calling.
warm, cold
At all times, however, an interior designer needs to be warm and friendly, so that he or she can __________ relationships that may _______ _______ in the long term, if not immediately.
cultivate
yield sales
A product goes through four basic stages: ____________, ______________, ____________ and ______________.
market introduction
market growth
market maturity
market decline
During the ____________ stage, a product must be made known to potential customers.
introduction
It can be assumed that not every customer who would buy the product ________________.
knows about it at this point
During the ______ stage the product becomes better _______.
growth, known
The work of the _________ is to make sure it is branded effectively.
marketer
During the __________ stage, the product reaches the peak of its ___________ and marketers spend their time focusing on ______-_______ its image.
maturity, popularity
fine-tuning
Finally, during the _______ stage customers ______ _________ in the product and the marketer must struggle to maintain sales.
decline, lose interest
In order to maintain and develop a ________ __________, an interior designer needs to have a firm grasp of public relations.
successful business
Unlike marketing, public relations are not geared towards a specific ________ for a client.
audience
To the contrary, public relations are aimed at ___________ and _____________ the firm’s presence to various groups in the public, attempting to develop a positive image of the firm in the __________ at large.
establishing and communicating, community
Public relations, most commonly takes the form of a _______ _________, which is a short statement released to the news media.
press release
Interior design firms also may offer ________, ________, or __________ articles in the interest of public relations.
workshops, seminars, or journal
There are a few services an interior designer may _______ in addition to the normal menu.
offer
For instance, an interior designer may provide site evaluations or ____________ studies of _____________ sites ________ a project is initiated.
comparative, prospective, before
The designer may provide services for ________ facilities that are not intended to be completed during the _______ ___________ phase.
future, contract administration
The designer may investigate the existing conditions of ________ __________, make revisions to drawings _____ _________, and may prepare construction drawings during the course of the project.
measure drawings, after approval
An interior designer will often conduct a post occupancy evaluation for his or her own use and may make its results ________________________.
available to the client for a small price
There are ______ services that may be provided by an interior designer, in addition to the standard services.
seven
For one, the designer may investigate ________ conditions or facilities.
existing
The designer may create specific ___________________, and may accept furniture on behalf of the client.
inventories of materials or furniture
The interior designer may assist with ____________, may help to procure ____, and may make _________ drawings.
graphics or signage
art
as-built
Finally, an interior designer may participate in _________ interviews with prospective contractors.
selection
This last additional service (selection interviews) is commonly requested when an interior designer has more experience working with the ___________ in a given area then does the ______.
contractors
client
