Business Math (Overview)

Question 1

To be legally valid, a contract has to provide these items: mutual understanding, an offer to provide or perform work, acceptance signed and dated, and consideration. What is meant by consideration?

a: Each party must be very careful to understand the specifics of the agreement
b: The exchange of something of value as a show of good faith, such as money.
c: Each party must be considerate to each other.
d: None of the above

Answer 1

b: The exchange of something of value as a show of good faith, such as money.

Question 2

True or False. Most contracts would forbid the owner or contractor from assigning their obligations without the consent of the other party.

Answer 2

True

Question 3

If a company has Current Assets of $115,000, Fixed Assets of $257,250, Current Liabilities of $27,350 and Fixed Liabilities of $187,258, what is its Liquidity Ratio?

a: 3.6 to 1
b: 3.9 to 1
c: 4.2 to 1
d: 4.8 to 1

Answer 3

c: 4.2 to 1

Question 4

A project has an estimated labor cost of $162,500 and an estimated material cost of $225,100, project overhead is estimated at 5% of both labor and material cost and assigned company overhead of 1.5% of material cost. If the contract is written for $425,000, what profit margin is the contractor expecting to make?

a: 3.44%
b: 4.95%
c: 6.25%
d: 7.3%

Answer 4

a: 3.44%

Question 5

Using the accrual accounting method, a contractor completes $12,500 worth of services in June. He collects $8,500 in accounts receivable in June. How much income will the contractor recognize in June?

a: $8,500
b: $21,000
c: $12,500
d: $4,000

Answer 5

c: $12,500