Why is construction financial management different from the financial management of other companies? I. Project oriented – Greater variety of projects (products) – Harder to determine the cost of projects – Cannot stockpile completed work for future – Greater need for detailed Job cost accounting ii. Decentralized – Must track equipment iii. Payment terms – Progress payments – Retention ;v. Heavy use of subcontractors 4. What actively are Involves In accounting for the company’s financial resources? L.
Making sure costs are accurately tracked through the accounting system II. Ensuring that the construction accounting system Is functioning properly Projecting the costs at completion for the individual projects, including unbilled committed costs sure that the needed financial statements have been prepared vi. Reviewing the financial statement – In line with the rest of the industry – Identify potential financial problems before they become a crisis 5. What activities are involves in managing the company’s costs and profits? I.
Controlling project costs it. Monitoring project and company profitability iii. Setting labor burden markups ‘v. Developing and tracking general overhead budgets v. Setting the minimum profit margin for use in bidding v’. Analyzing the profitability of different parts of the company and making the necessary charges to improve profitability vii. Monitoring the profitability of different customers and making the necessary marketing changes to improve profitability. 6. What activities are involves in managing the company’s cash flows? I.
Matching the use of in-house labor and subcontractors to the cash available for use on a project it. Ensuring that the company has sufficient cash to take on an additional project iii. Preparing an income tax projection for the company ‘v. Preparing and updating annual cash flow projections for the company v. Arranging for financing to cover the needs of the construction company 7. List some examples of financial decisions that construction managers must make. I. Accounting for financial resources it. Managing costs and profits iii. Managing cash flow lb.
Choosing among financial alternatives 8. Define the study of finance. The study of the process, institutions, markets and instruments used to transfer money and credit between individuals, business, and governments. Examining value, time value of money, and cash flow. 9. Define real estate finance. Real estate finance provides the full range of corporate, structured finance and capital raising services, together with non-discretionary investment advice for individual properties, portfolios, indirect ownership services and complex situations.
This includes corporate recovery services, specialist wholesale unlisted equity raising and derivative brokerage. 10. What does the flow of funds cycle show? Institutions create financial instruments to transfer money and credit to real property orientations. Financial institutions channel funds from surplus income units to deficit income units. 11. List five types of financial intermediaries and give a brief description of each. I. Commercial Banks it. Thrift institutions iii. Insurance companies ‘v. Pension funds v. Investments companies 12.
Distinguish between primary and secondary markets. Give an example of each. Primary mortgage market – The market where mortgages are originated – Originators either hold mortgages in portfolio or sell them into the secondary mortgage market. – Egg. Commercial banks, savings and loan associations and mutual savings banks. Secondary mortgage market – Purchases mortgages from originators in the primary mortgage market – Issues mortgage-related securities using mortgage pool as collateral – Egg. Fannies Mae, Freddie Mac, Genie Mae 13.
Distinguish between money and capital markets. Explain in which of these markets The money market is a segment of the financial market in which financial instruments with high liquidity and very short maturities are traded. The money market is used by participants as a means for borrowing and lending in the short ERM, from several days to Just under a year. Money market securities consist of negotiable certificates of deposit (CDC), banker’s acceptances, treasury bills, commercial paper, municipal notes, federal funds and repurchase agreements (repose).
Money market investments are also called cash investments because of their short maturities. Capital market take place in real estate financing because it is long term borrowing required to establish the real property. A capital market is one in which individuals and institutions trade financial securities. Organizations and institutions in the public and private sectors also often sell securities on the capital markets in order to raise funds. Thus, this type of market is composed of both the primary and secondary markets. Capital markets are perhaps the most widely followed markets.
Both the stock and bond markets are closely followed and their daily movements are analyzed as proxies for the general economic condition of the world markets. As a result, the institutions operating in capital markets – stock exchanges, commercial banks and all types of corporations, including embank institutions such as insurance companies and mortgage banks – are carefully examined. The institutions operating in the capital markets access them to raise capital for longer purposes, such as for a merger or acquisition, to expand a line of business or enter into a new business, or for other capital projects.
Entities that are raising money for these long-term purposes come to one or more capital markets. In the bond market, companies may issue debt in the form of corporate bonds, while both local and federal governments may issue debt in the form of government bonds. Similarly, companies may decide to raise money by issuing equity on the stock market. Government entities are typically not publicly held and, therefore, do not usually issue equity. Companies and government entities that issue equity or debt are considered the sellers in these markets. 4. What is the difference between real property and personal property? Real property is the right in land and its permanent structures. Personal property is a type of property that is generally that things that are movable, it is not real estate. 15. What is meant by an estate? Why are estates important in real estate finance? Estate means “all that a person owns”. The degree, quantity, nature, and extent of interest that a person has in real and personal property. 16. The original fee owner can give up some property rights to a lessee.
The value of the leased fee estate will depend on the amount of lease payments excepted during the term of the lease plus the value of the property when the lease terminates and the original owner receives the reversionary interest. 17. What is an abstract of title? Abstract of title means by which buyers of real estate: Learn in advance whether their sellers have and can convey the quality of title they claim to possess Receive compensation if the title, after transfer, turns out to be as represented. 18.
Name the three general methods of title assurance and briefly describe each. Explain on which would you recommend to a friend purchasing a home and why. I. ) General warranty deed – Is the most commonly used deed in real estate transactions and the most desirable type of deed from the buyers perspective. Special Warranty deed – Makes the same warranties as a general warranty deed expect that it limits their application to defects and encumbrances that occurred only while the grantor may have in the property.
Quit claim deed – Offers the grantee the least protection. Such a deed simply conveys to the grantee whatever nights, interests, and title that the grantor may have in the property. General warranty deed in recommended, because it offers the most comprehensive warranties about the quality of the title. 19. Would it be legal for you to give a quitclaim deed for the Statue of Liberty to your friend? The property (which may will be none) in favor of the grantee.
