Midterm

Question 1

Qualifying Individuals for a Sole Proprietor are:

Answer 1

Owner or RME

Question 2

Qualifying Individuals for a Partnership are:

Answer 2

Qualifying Partner or RME

Question 3

Qualifying Individuals for a Corporation are:

Answer 3

RMO or RME

Question 4

Qualifying Individuals for an LLC are:

Answer 4

Responsible Managing Member, Responsible Managing Manager, RME or RMO

Question 5

CSLB is an acronym for

Answer 5

Contractors State Licensing Board

Question 6

According to California Law, a Contractor ________________

Answer 6

is classified by the board according to the particular trade and skills necessary to do their work

is a builder

refers to anyone who owns and operates a construction business

all of these answers are correct

Question 7

A General Engineering License is also referred to as

Answer 7

An A license; builds bridges and dams

Question 8

A General Building License is also referred to as

Answer 8

a B license; covers all trades which relate to a structure, can supervise various trades

Question 9

A Specialty Contractor License is referred to as

Answer 9

C & D license; covers specialized trades for a specific trade or craft

Question 10

When applying for a Contractors License in California (check all answers that apply)

Answer 10

Need to submit fingerprints (live scan)

Need to pass open book asbestos exam

An applicant must declare at least $2,500 of operating capital for business

Complete appropriate application form & submit with fee

Need at least 4 years of journeyman level experience-may include apprenticeship training or college

Question 11

A Corporation must (choose all that apply)

Answer 11

be owned by one or more shareholders

be filed with the Secretary of State’s office

be governed by a President, Secretary and Treasurer (may all be the same person)

Question 12

A PERSON MAY SERVE AS THE QUALIFYING INDIVIDUAL FOR NO MORE THAN FOUR (4) FIRMS IN ANY ONE-YEAR PERIOD ONLY IF CERTAIN CONDITIONS ARE MET

Answer 12

False - A maximum of 3 firms in a year if certain conditions are met

Question 13

If applicant does not pass both the Law and Business AND the Trade portions of the exam, he/she must apply for another exam date within 90 days and pay a reschedule fee OR the application becomes void

Answer 13

True

Question 14

If license is not renewed before expiration date, the licensee will be considered unlicensed until it is renewed (license may be renewed within five years of expiration day – it becomes void after 5 years)

Answer 14

True

Question 15

A partnership only needs to apply for a new license if the partnership changes due to the qualifying partner leaving the partnership.

Answer 15

False

Question 16

A license bond is required in the amount of $15,000 once you pass the exam in order to get your license. The purpose of this bond is to protect your company from a lawsuit if something goes wrong on a job,

Answer 16

False

Question 17

Which of the following statements about Home Improvement Contracts are TRUE?

They do not have to be in writing (may be verbal)

Must be understandable to all parties involved

Must have the consent of all parties

Must consist of parties which are capable of entering into a contract

Answer 17

Must be understandable to all parties involved

Must have the consent of all parties

Must consist of parties which are capable of entering into a contract

Question 18

Who may a contractor enter into a contract with?

Answer 18

An authorized agent of the owner of a property

Another Contractor

The owner of a property

Question 19

Mechanics Lien Warning – informs owner about the rights and responsibilities of contractor with regard to Mechanics Lien Law.

Answer 19

True

Question 20

The General Liability disclosure informs the homeowner if contractor has Workers Compensation insurance or not

Answer 20

True

Question 21

If the contract price is greater than $500, home improvement contracts require the following:

Answer 21

Must be in writing and signed by all parties involved

The name, address and license number of the contractor and the registration number of any salesperson who solicited the contract

A description of the work to be done, the materials to be used, the equipment to be used or installed, and the agreed payment for this work

Question 22

The buyer in a home solicitation contract has the right to

Answer 22

cancel this contract at any time prior to midnight of the third business day following the signing of the contract

Question 23

If a Home Solicitation contract is for repair of property damaged in a disaster, the cancellation period is increased to 14 days

Answer 23

False - 7 days

Question 24

Beyond what is required by law, there are practices which help insure against unnecessary disputes during the course of a project:

Answer 24

All aspects of the contract should be written as clearly as possible

It is advisable to have all contracts in writing

Question 25

Mechanics Lien Law covers the 3 most important ways of recovering construction payments rightfully owed to contractors:

Answer 25

Payment Bonds Stop Notices Mechanics Lien

Question 26

Pertaining to a Mechanics Lien which of the following statements are true? Owner can free the property from the lien by posting a bond equal to 3 times the amount of the lien After the lien is filed, a stop payment lawsuit in court – if successful – will force the sale of the property so the contractor can be paid from the proceeds Claim against personal property Owner Will not be able to refinance or sell until lien is released It is a powerful legal remedy because you can put a hold on property first and then go to court to prove your claim (normally it is the other way around) It takes effect the day it is recorded with the county recorder’s office, at which time it becomes public record Hold placed on the title (ownership) of real estate by contractor, material supplier or other person who has improved the value of the property by performing work or supplying material, but who has not been paid

Answer 26

It is a powerful legal remedy because you can put a hold on property first and then go to court to prove your claim (normally it is the other way around) t takes effect the day it is recorded with the county recorder’s office, at which time it becomes public record Owner Will not be able to refinance or sell until lien is released Hold placed on the title (ownership) of real estate by contractor, material supplier or other person who has improved the value of the property by performing work or supplying material, but who has not been paid

Question 27

Which of the following statements are TRUE about Stop Notices: Group of answer choices Stop notices apply to both public and private works, mechanics’ liens apply to only private works You must file EITHER a stop notice OR a mechanics’ lien Requires recipient to set aside money to pay a judgment if the claimant wins a lawsuit in court to enforce the stop notice Stop notices are not filed with the county recorder like mechanics liens are because they are aimed at recovering money, not property. They are served directly to the owner. A claim against construction funds a written notice to a property owner, lender of funds, OR a public agency that the contractor has performed work for or supplied materials to the OWNER on a private or public project but has not been paid Everyone who can file a mechanics’ lien can file a stop notice EXCEPT the prime contractor

Answer 27

Stop notices are not filed with the county recorder like mechanics liens are because they are aimed at recovering money, not property. They are served directly to the owner. Requires recipient to set aside money to pay a judgment if the claimant wins a lawsuit in court to enforce the stop notice Stop notices apply to both public and private works, mechanics’ liens apply to only private works A claim against construction funds Everyone who can file a mechanics’ lien can file a stop notice EXCEPT the prime contractor

Question 28

If a private property owner demands in writing that a claimant submit a stop notice and the claimant fails to do so, they give up their right to a stop notice AND mechanics’ lien

Answer 28

True

Question 29

An institutional lender does not have to respond to a stop notice unless it is bonded 2 times the amount of the claim (only applies to private works, not public works).

Answer 29

False. 1.25x

Question 30

Which of the following statements are TRUE pertaining to PAYMENT BONDS. Group of answer choices The Owner must record the original contract and a Payment Bond for at least 75% of the contract price with the County Recorder before work has begun referred to by contractors as a “labor and materials” bond, guarantees that the bonding company will pay all valid claims for unpaid bills owed by the person posting the bond – up to the maximum amount of the bond The Sub Contractor must post this bond if the owner requires it (or on any Public Works contract over $25 K) The sub contractor will look to the bonding company for payment of any unpaid invoices

Answer 30

referred to by contractors as a “labor and materials” bond, guarantees that the bonding company will pay all valid claims for unpaid bills owed by the person posting the bond – up to the maximum amount of the bond The sub contractor will look to the bonding company for payment of any unpaid invoices

Question 31

Which of the following statements about Preliminary Notices for private works are TRUE? Group of answer choices Establishes the claimants rights to a mechanics’ lien OR stop notice Notifies the owner / lender that the claimant is participating in some way in the construction project Must be given to the property owner, prime contractor AND lender (if any) BEFORE you can file a mechanics’ lien or stop notice ANYONE improving private property without a direct contract with the Prime Contractor is obliged to file a preliminary notice Must be served within 20 days from the time the claimant LAST performed work or supplied materials.

Answer 31

Notifies the owner / lender that the claimant is participating in some way in the construction project Must be given to the property owner, prime contractor AND lender (if any) BEFORE you can file a mechanics’ lien or stop notice Establishes the claimants rights to a mechanics’ lien OR stop notice

Question 32

An employee may file a complaint with the Labor Commissioner for:

Answer 32

Awards for workers’ compensation benefits Claims for damages based on misrepresentations of employment conditions Claims for vacation pay, severance pay, or other compensation that is part of a wage agreement Claims for loss of wages as a result of discharge or wage garnishment

Question 33

Which of the following statements are true about Workers Compensation Insurance? Group of answer choices The employer must notify insurance carrier within 5 days of notification from employee If an employer disputes an employees claim, a hearing may be held before the Workers’ Compensation Appeals Board If an employee is injured on the job, he or she must submit written notice to his or her employer within 60 days of the injury. Once an employee has received benefits through workers’ compensation, he or she is generally still allowed to file a lawsuit against the employer

Answer 33

If an employer disputes an employees claim, a hearing may be held before the Workers’ Compensation Appeals Board The employer must notify insurance carrier within 5 days of notification from employee

Question 34

Before obtaining a contractor’s license, an applicant must submit to the CSLB one of the following: Certificate of Insurance from workers’ compensation insurance carrier Certificate of Consent to Self-Insure An Exemption from Workers’ Compensation form

Answer 34

True

Question 35

If an employee quits, they must be paid within ______ unless _______ notice has been given. Then they must be paid at the time they quit.

Answer 35

72 hours

Question 36

Possible outcomes of a DOSH inspection may be (choose all that apply)

Answer 36

Issued a citation for serious or general violation Issued information memorandum which serves as a warning Notice of no violations

Question 37

Employer must have and maintain an EFFECTIVE INJURY AND ILLNESS PREVENTION PROGRAM which shall include the following provisions: 1.No work is to take place in an area deemed to be unsafe unless the work is to correct safety issue 2.Employer must survey a job site before work begins to identify potential hazards 3.Regularly scheduled inspections shall be conducted to identify unsafe practices or conditions 4.Investigate and produce written report on all occupational illnesses, accidents and ‘near misses’ 5.Management and /or safety committee meet on a regular basis to review all reports 6.Employer shall allow only qualified persons to operate equipment 7.Employer must provide and require the use of safety devices and equipment

Answer 37

True

Question 38

Tailgate safety meetings must be held at least once every _____working days with all employees

Answer 38

10 days

Question 39

Which of the following are true regarding CASH BASIS accounting methods? Group of answer choices Most often used by small businesses using cash rather than credit Helps contractors judge their ability to pay debts, finance assets, expand business Only cash transactions are recorded This method is highly recommended for contractors Allows for credit transactions as well as cash

Answer 39

Only cash transactions are recorded Helps contractors judge their ability to pay debts, finance assets, expand business Most often used by small businesses using cash rather than credit

Question 40

Which of the following are true regarding ACCRUAL BASIS accounting methods? Group of answer choices Recognizes all revenues when they are earned and expenses when they are incurred, regardless of when payment is actually made or received Overall not recommended for contractors because it fails to account for several vital accounting components This method has some value because it shows the cash position of the business Normally provides a better indication of a business’ financial position over a period of time by allowing for what is o

Answer 40

Recognizes all revenues when they are earned and expenses when they are incurred, regardless of when payment is actually made or received Normally provides a better indication of a business’ financial position over a period of time by allowing for what is o

Question 41

Which of the following statements are true regarding Financial Statements (Income Statements and Balance Sheets): Group of answer choices Both statements normally show information for at least two years so that performance can be compared between different years Result of the Income Statement is to show the equity or net worth of a business at a particular point in time A Balance Statement is to show the profit made by a business over a period of time Income Statements and Balance sheets are useful as they show different information

Answer 41

Income Statements and Balance sheets are useful as they show different information Both statements normally show information for at least two years so that performance can be compared between different years

Question 42

Depreciation is the increase in value of a fixed asset over time. Can be calculated using different methods, it is treated as a business income

Answer 42

False; Decrease in value; business expense...

Question 43

Direct Labor Burden is the payroll costs for direct labor, including taxes, insurance, and employee benefits

Answer 43

True

Question 44

CAPITALIZATION refers to the total of all financial resources that are available to the owner of a business

Answer 44

True

Question 45

WORKING CAPITAL (OPERATING CAPITAL) is the amount of money that is available for a business to use during the upcoming month

Answer 45

False

Question 46

Equity Funds –funds which are borrowed from a lending source and are repaid over time with interest. Usually the contractor will not relinquish any control of the business with this type of financing.

Answer 46

False

Question 47

Line of Credit is a type of debt that will provide short term working capital. Requires balance sheet and income statement from current year and previous years (if possible) plus a good credit history. May have to use certain assets (land, building) as collateral for line of credit.

Answer 47

True

Question 48

Profit is the starting point in budget development because it is required to_________________________

Answer 48

provide excess compensation for personnel purchase fixed assets retire debt

Question 49

The five-step forecasting process, proposed by Kevin Kehoe, business consultant, includes these steps:

Answer 49

Determination of personnel requirements Budget parameters Sales and net profit determination Determination of new sales requirement Determination of working capital requirement

Question 50

A key point to remember is that increased revenues do not necessarily generate increased profit.

Answer 50

True