Builder's Guide to Accounting 08

Question 1

1. Successful builders seek PROFITS, not VOLUME. Low profit VOLUME never:

Answer 1

adds to the growth of an operation. Instead, it saps income, ties up Working Capital and Equipment, and demands time and energy that could be devoted to more profitable jobs.

Question 2

2. What should be considered before taking on a new TYPE of job?

Answer 2

1. What is the competition like?
2. What is the demand for this type of work?
3. Is the market speculative?
4. How much cash will be tied up?
5. Will you have to buy or lease special equipment?
6. What portion of the total sales will the NEW work represent?
7. What is the estimated ROI?

Question 3

3. Compare your estimates on NEW TYPE of work to a STANDARD or GOALS. This should be what you expect as a result:

Answer 3

1. The YIELD on your investment
2. The NET PROFIT
3. THE HIGHER THE RISK, THE HIGHER THE YIELD SHOULD BE.

Question 4

4. p 90. What’s the relationship between profits and volume?

Answer 4

The MARGIN of profit INCREASES with VOLUME IF costs and expenses are a DECLINING PERCENTAGE of GROSS RECEIPTS.