Homework Clinic
Hands-on Clinic => Skills and Trades => Topic started by: sarasara on Jul 26, 2018
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How would you establish an overhead budget for a construction company?
What will be an ideal response?
Question 2
What are three financial ratios that can be used to assess the profitability of a construction company? What are the differences among the ratios?
What will be an ideal response?
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Answer to Question 1
An overhead budget should be developed based on the anticipated annual volume of work and the expected costs for all salaries and expensed not related to specific projects. Since the overhead budget has a significant influence on the overall profitability of the company, it should be established based on anticipated revenues.
Answer to Question 2
The three ratios that measure the profitability of a company are: (1) return on assets, (2) return on equity, and (3) return on sales. The return on assets measures the efficiency of the company in managing its assets and generating profits. The return on equity is a measure of the return on the owners' investments. The return on sales provides the net profit margin of the company.