Project Finance

Question 1

What is a CVR

Answer 1

Cost value reconciliation is a reporting tool that combines the cost plan and value plan to give the cash flow position as well as the current and projected margin for a project.

Question 2

What is margin?

Answer 2

The margin is the profit that the project makes before overheads are deducted

Question 3

What is a project forecast?

Answer 3

A project forecast is a projection of a companies costs, revenues and ultimately profit margin.

Question 4

Why is CVR reporting important?

Answer 4

1. So the company can make necessary plans if the project is losing or making more money than anticipated.
2. As a record to go back to eg for forming statutory accounts.

Question 5

How are projects funded?

Answer 5

1. Share capital
2. Private investment
3. Loans
4. Public funding eg HAs

Question 6

Why is cash flow forecasting important?

Answer 6

1. To help firms predict future cash positions
2. Avoid cash flow deficits
3. Manage surplus cash
4. Make informed investment decisions

Question 7

What would you find in a cost plan?

Answer 7

1. Sub contractor costs
2. Materials
3. Utilities
4. Fees
5. Plant
6. Prelims
7. Risk/contingency

Question 8

What is EVM?

Answer 8

Earned Value Management

Question 9

How is EVM different from the CVR?

Answer 9

Earned value management processes the CVR reporting against the project programme

Question 10

What is the ledger?

Answer 10

The ledger is a record keeping system of all of the financial transactions in and out of the account eg Xero

Question 12

What is an accrual?

Answer 12

A cost the business has not yet paid out eg hasn’t hit the ledger

Question 13

What is the difference between risk and contingency?

Answer 13

Risk is money within the CSA allocated to a specific item that could incur cost. Contingency is the allocation of money for unexpected costs.

Question 14

Give an example of a time you reported on costs for a project

Answer 14

On my Onslow Mills project I set up a cost to complete to analyse the remaining spend for the project vs what was left to claim from the client

Question 15

How would you go about setting up a cash flow forecast for a project?

Answer 15

1. Understand the expected costs associated with the project and plot them monthly against the programme.
2. As a rule of thumb I would follow the RICS guidance to use an S curve for the project cash flow

Question 16

Describe an S curve

Answer 16

Graph showing total payments over time, shows the peak turnover for the project during the middle of a project