Question

Topics: Construction Accounting & Finances

Capital Investments:

1.) Before you make a decision to acquire a large piece of equipment what tools would you use to determine if this investment is really worth the cost and how would you finance this large investment? (Please give a one paragraph brief detailed example.)

Budgets:

2.) Discuss the importance of budgeting. Then give an example of how you would control your budget as a construction manager. (Please give a one paragraph brief detailed example.)

Answer 1

Investment decision can be long term or Short term..A long term investment decision is also called capital budgeting decision.It involves commiting the finance on a long term basis.e.g.,making investment in a new machine to replace an existing one or acquiring a new fixed assets or opening a new branch etc These decisions are very crucial. They affects it's earning capacity over the long term ,assets of firm,profitability and competitiveness are all affected by the capital budgeting decision.Lets consider an example .....We have get a construction contract and generally for our other works levelling is done by some other company . But in this construction it has to b done by us and for it we require a leveller .So here are many things that we have to consider -First of all we can buy a leveller or we can take it on rent also .For choosing between these two options we have to consider our investment costs and the charges difference between these two options . Now next that do we have place where the levelleecan be placed if we permanent buy it .Do we have anyone who knows how to use it . These are some of the points which we should consider before acquiring any large piece of equipment.

2.Importance of budgeting-

Since budgeting allows you to Crete a spending plan for your money.It ensures that you will have always money for the things that you need and the things that are important to you.Following the budget or spending plan will also keep you out of debt or help you work your way out of debt.

As a construction manager we have to be first consider our investment cost .And then we have to make our list that how the priorities should be given to task .This can easily be done by using cpm(critical path method )or pert technique .

Then we have always to take care that materials should be available in appropriate amount before their construction.

Also for contolling budget we should use the material which is easily available in that area so that transportation charges could be taken care of.

These are some points which can help us in controlling budget.