Financial Management and Accounting Fundamentals for Construction -- Contents -- Preface -- 1 Introduction -- The Big Paradox -- What Is Financial Management? -- First Stop: Financial Accounting -- Why Construction Accounting Is Different from Accounting in Other Business Sectors -- Who Is at Risk? -- Projects: The Output of the Construction Process -- Project-Level Controls -- Time Value of Money -- Entrepreneurial Issues -- Review Questions and Exercises -- 2 Understanding Financial Statements -- Introduction -- Why Should You Care about Accounting? -- Generally Accepted Accounting Principles -- Cash and Accrual Bases: Two Ways to Look at Accounting -- Cash Basis of Accounting -- Accrual Basis of Accounting -- Accounts -- Account Hierarchy -- Financial Reports -- Bookkeeping -- The Balance Sheet -- Balance Sheet Layout -- Balance Sheet Account Categories in Detail -- The Fundamental Accounting Equation -- Asset Values -- The Fundamental Equation and Owners' Risk -- Balance Sheet for Fudd Associates, Inc. -- Key Accounts -- The Income Statement -- Components of an Income Statement - More Details -- The Statement of Cash Flows -- Contract Backlog -- Public Corporations -- Review Questions and Exercises -- 3 Analyzing Company Financial Data -- Introduction -- Vertical and Horizontal Analyses -- Vertical Analysis: Financial Ratios -- Liquidity Indicators: Can This Company Get Cash in a Hurry? -- Current Ratio -- Quick Ratio -- Working Capital -- Profitability Indicators: Is This Company Making Enough Profit? -- Return on Equity -- Return on Revenue -- Return on Assets -- Earnings Per Share -- Efficiency Indicators: How Long Does It Take a Company to Turn over Its Money? -- Average Age of Inventory -- Average Age of Accounts Receivable (Collection Period) -- Average Age of Accounts Payable -- Other Average Ages -- Operating Cycle -- Turnover Ratios.

Revenue to Assets Turnover -- Capital Structure Indicators: How Committed Are the Owners? -- Debt to Equity -- Assets to Equity (Leverage) -- Other Indicators -- Horizontal Analysis: Tracking Financial Trends -- Time Series Graphs -- Index-Number Trend Series -- Conclusion -- Review Questions and Exercises -- 4 Accounting Basics -- Introduction -- Transaction Processing -- Journalizing the Transaction -- A Transaction to Enter Initializing Capital -- A Vendor Billing Transaction -- A Billing to the Client -- Posting Entries to the Ledger -- Relationship of Work-in-Progress and Revenue/Expense Accounts -- Closing the Accounting Cycle -- Recognition of Income -- Percentage-of-Completion Method of Income Recognition -- Completed-Contract Method of Income Recognition -- Transactions during a Period -- Posting to the General Ledger during the Accounting Period -- Closing Actions at the End of the Period -- Review Questions and Exercises -- 5 Project-Level Cost Control -- Objectives of Project-Level Cost Control in Construction -- Unique Aspects of Construction Cost Control -- Types of Costs -- The Construction Estimate -- Cost Control System -- Building a Cost Control System -- Cost Accounts -- Cost Account Structure -- Project Cost Code Structure -- Cost Accounts for Integrated Project Management -- Earned Value Analysis -- Labor Data Cost Collection -- Review Questions and Exercises -- 6 Forecasting Financial Needs -- Importance of Cash Management -- Understanding Cash Flow -- Retainage -- Project Cost, Value, and Cash Profiles -- Cash Flow Calculation-A Simple Example -- Peak Financial Requirements -- Getting Help from the Owner -- Optimizing Cash Flow -- Project Cash Flow Estimates -- Using Software for Cash Flow Computations -- Company-Level Cash Flow Planning -- Strategic Cash Flow Management: "Cash Farming" -- Project and General Overhead.

Fixed Overhead -- Considerations in Establishing Fixed Overhead -- Breakeven Analysis -- Basic Relationships Governing the Breakeven Point -- Review Questions and Exercises -- 7 Time Value of Money and Evaluating Investments -- Introduction -- Time Value of Money -- Interest -- Simple and Compound Interest -- Nominal and Effective Rate -- Equivalence and MARR -- Discount Rate -- Importance of Equivalence -- Inflation -- Sunk Costs -- Cash Flow Diagrams -- Annuities -- Conditions for Annuity Calculations -- Calculating the Future Value of a Series of Payments -- Summary of Equivalence Formulas -- Worth Analysis Techniques: An Overview -- Present Worth Analysis -- Investments with Different Life Spans -- Equivalent Annual Worth (EAW) -- Internal Rate of Return -- Limitations of the IRR Method -- An Example Involving Cost Recovery -- Comparison Using EAW -- An IRR Example-Owner Financing Using Bonds -- Review Questions and Exercises -- 8 Construction Loans and Credit -- Introduction -- The Construction Financing Process -- A Sample Developmental Project -- The Amount of the Loan -- How Is the Cap Rate Determined? -- Mortgage Loan Commitment -- Construction Loan -- Commercial Lenders -- Lines of Credit -- Interest Paid on Outstanding Balance -- Commitment Fees -- Compensating Balances -- Clean-Up Requirement -- Collaterals -- Accounts Receivable Financing -- Trade Credits -- Long Term Financing -- Loans with End-of-Term Balloon Payments -- Review Questions and Exercises -- 9 The Impact of Taxes -- Introduction -- Types of Taxes -- Income Tax Systems -- Alternatives for Company Legal Organization -- Sole Proprietorships -- Partnerships -- Corporations -- Limited Liability Partnerships and Companies -- Other Options -- Taxation of Business -- Business Deductions in General -- Taxable Income: Individuals.

Itemized Deductions, Standard Deductions, and Personal Exemptions -- The Tax Significance of Depreciation -- Calculating Depreciation -- Straight Line Method -- The Production Method -- Depreciation Based on Current Law -- Marginal Tax Rates -- Tax Credits -- Tax Payroll Withholding -- Tax Payment Schedules -- Marginal, Average, and Effective Tax Rates -- Net Operating Losses -- Taxes on Dividends and Long-Term Capital Gains -- Alternative Minimum Tax -- Summary -- Review Questions and Exercises -- Appendix A Typical Chart of Accounts -- Appendix B Further Illustrations of Transactions -- Appendix C Compound Interest Tables -- References -- Index.