Financial Management and Accounting Fundamentals for Construction

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  • Format: Hardcover
  • Copyright: 2009-09-22
  • Publisher: Wiley

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Financial management is an aspect of every construction project. Here is an easy-to-understand guide to financial concepts specific to the construction industry for both students and working professionals. The focus on only construction-related issues and the succinct, practical, and visually-oriented approach makes the material easily accessible to construction professionals who are not financial experts. Case studies and examples, several of them international, show how the principles apply to real world applications.

Author Biography

Daniel W. Halpin is Professor Emeritus and former head of the Division of Construction Engineering and Management at Purdue University. The author of more than ten books, he is a member of the National Academy of Construction, a recipient of ASCE's Peurifoy Construction Research Award and the Carroll H. Dunn Award of Excellence from the Construction Industry Institute (CII).

Bolivar A. Senior is an Associate Professor in the Department of Construction Management at Colorado State University. He has extensive professional experience in the management of construction projects. Dr. Senior has published many articles relating to construction financing as well as time planning and control. He is a member of the American Society of Civil Engineers and the Dominican College of Professional Engineers, Architects and Surveyors.

Table of Contents

The Big Paradox
What is Financial Management?
Specifics: Areas Addressed Here
Project-Level Controls
Time value of money
Entrepreneurial Issues
Review Questions And Exercises
Understanding Financial Statements
Generally Accepted Accounting Principles
Cash and accrual bases: Two ways to look at accounting
Cash Basis of Accounting
Accrual Basis of Accounting
Account Hierarchy
Financial Reports
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
Revisiting the Airport Screen
Components of an Income Statement - More Details
The Babel Tower of Accounting
The Statement of Cash Flows
Contract Backlog
Public Corporations
Review Questions And Exercises
Analyzing Company Financial Data
Vertical Analysis: Financial Ratios
Liquidity Indicators: Can this company get cash in a hurry?
Profitability Indicators: Is this company making enough profit?
Efficiency Indicators: How long does it take a company to turn over its money?
Capital Structure Indicators: How committed are the owners?
Other Indicators
Asset Newness
Horizontal Analysis: Tracking Financial Trends
Time Series Graphs
Review Questions And Exercises
Accounting Basics
Transaction Processing
Posting entries to the ledger
Relationship of work- in-progress and revenue/expense accounts
Closing the accounting cycle
Recognition of income
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
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
Charges for Indirect and Overhead Expense
Review Questions And Exercises
Forecasting Financial Needs
Importance of Cash Management
Understanding cash flow
Project cost, value and cash profiles
Cash Flow Calculation -A Simple Example
Peak Financial Requirements
Getting Help from the Owner
Optimizing Cash Flow
Developing a Project Cash flow Estimate
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
Time Value of Money and Evaluating Investments
Time value of money
Simple and compound interest
Nominal and effective rate
Equivalence and MARR
Discount Rate
Importance of Equivalence
Sunk Costs
Cash flow diagrams
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
Recovering investment capital
Internal Rate of Return
A Practical Example Using PW Analysis
Comparison Using EAW
An IRR Example - Owner Financing Using Bonds
Review Questions And Exercises
Construction Loans and Credit
The Construction Financing Process
An Example Developmental Project
The Amount of the Loan
How is the Cap Rate Determined?
Mortgage Loan Commitment
Construction Loan
Lines of Credit
Interest Paid on outstanding balance
Commitment fees
Compensating balances
Clean-up requirement
Accounts Receivable Financing
Trade Credits
Long Term Financing
Loans with end-of term balloon payments
Review Questions And Exercises
The Impact of Taxes
Types of taxes
Income Tax Systems
Alternatives for company legal organization
Taxable Income: corporations
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
Review Questions And Exercises
Typical Chart of Accounts
Further Illustrations of Transactions
Compound Interest Tables
Table of Contents provided by Publisher. All Rights Reserved.

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