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Flashcards in Financial Management Deck (42):
1

Architect's role as the owner's agent

working for the owner in certain designated areas where the architect has been given authoriy to act on the owner's behalf. Not taking on responsibilities for which the owner is normally responible!

2

Which type of fee is preferable when the client does not yet have a program?

Cost plus fee based on multiple of direct expense.

3

A common way to evaluate staff productivity is to examine ___

Net multiplier

4

Net multiplier

Net revenues/ Direct Salary Expenses

5

In case fee expenditures exceed the budget, what is the first step: to notify the client or to try to solve the problem within the firm?

Solve the problem

6

Monitoring architectural fees and the project completions is most often done___

Weekly

7

Cost plus fee

Compensates the architect for the actual cost of doing the work plus a fee for profit.
Fees are generally billed at hourly rates, which are determined as a multiple of an employee's salary or salary plus benefits. The multiplier is adjusted based om overhead the firm must pay and profit levels the firm wishes to achieve. Calculations of appropriate billing rates must consider the employee's base salary, any benefits offered to the employee, and taxes.

8

Net multiplier range

2 to 3.5

9

Fixed fee

Stipulated sum of money that the client will pay the achitect for services.The services are agreed upon in advance, and changes in services generally warrant additional compensation for the architect. The fees are determined by creating a list of tasks necessary to complete the project, assigning hours and personnel to each task, and multiplying the number of hours expected to complete the task by each person's hourly billing rate. The result is based on the personnel selected and the time the estimator thinks that it will take to complete the project. The estimate then can be adjusted to make a profit.

10

Percentage of construction cost

Not commonly used. The architect's fee is a percentage of cost of project construction. With this method, the owner may wonder if the architect will design a more expensive project to increase the design fee; the inexpensive project may not cover the architect's expenses.

11

Unit cost method

Based on some unit (square footage)

12

When deciding on what to charge a developer on an hourly rate agreement, an architect should verify

Net multiplier.

13

Quick ratio

Current assets/Current liabilities

14

What should an architectural firm do to ensure it has clear copyright claims to all of its worl?

Develop a standard copyright notice that is printed on every drawing and project manual. Register all works with the U.S. Copyright Office.

15

Is printed material of the architect's work automatically considered to have copyright protection when it is published?

Yes, but the architect still should protect himself by registering the work with the U.S. Copyright Office.

16

Balance sheet

Shows all assets and liabilities of a firm and gives an overall view of the financial health of a firm, including its net worth. It can be used to evaluate a firm's condition at any time.

17

Profit and loss statement

Lists the income and expenses of a firm for a given period of time

18

Current ratio

Current assets/Current liabilities

19

Current ratio minimum

1.0 to 1.5, the higher the better

20

Overhead rate

Ratio of indirect expenses to direct labor

21

Break even rate

Overhead rate plus 1

22

Hourly billing rate

Charged to a client for one hour of work

23

Current earnings

Revenue after distributions and taxes

24

What is cash basis reporting used for?

Annual tax liability

25

What is the connection between two reports?

Distribution of net profit is based on cash on hand

26

Net multiplier range

28-30%

27

Eventual distribution is a result from

Profit

28

Overhead rate is used for

Multiplying an hourly salary

29

Overhead rate

The cost of indirect expenses for direct labor

30

Net multiplier

Dollars earned on 1 hour of direct labour

31

P-L statement

Shows revenue, direct labor, expenses,profit for a period -month to year to date

32

Balance sheet

Shows assets, liabilities, equity

33

Balance sheet

Instant snapshot of the firm's financial condition

34

On average financial reports are reviewed how often?

Monthly

35

When is it advisable to create the annual budget?

Fourth quater if preceding year

36

After the annual budger has been approved, can it be altered?

No. Or separate document will need to be created to reflect changes.

37

How is the document created instead of the previous annual budget called?

Forecast plan

38

Backlog

Project revenue not yet invoiced or earned

39

What review is required for the profit plan?

Performance in previous three years

40

What is the most challenging to estimate in the profit plan?

Indirect expenses(many variables)

41

Claims-made policy

The date the claim is made is a triggering event for coverage

42

Idemnification

Hold harmless provision