Construction Financial Management

ConstructionFinancial
Management
S.L.Tang

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S.L. Tang

Construction Financial Management

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Construction Financial Management
3rd edition
© 2015 S.L. Tang & bookboon.com
ISBN 978-87-403-0956-0

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Download free eBooks at bookboon.com


Construction Financial Management

Contents

Contents
1

Financial Statements – Income Statement and Balance Sheet

8

1.1

Introduction

8

1.2

Income Statement

8

1.3

Balance Sheet

9

1.4

Working Capital and Current Ratio

12

1.5

Under Billing and Over Billing

13

1.6

Worked Examples

15

2

Financial Statement Analysis of a Construction Company

21

2.1

Analysis of Financial Statements by Financial Ratios

21

2.2

Five Categories of Financial Ratios

21

2.2

A Case Study

25

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Construction Financial Management

3

Contents

Compound Interest, Net Present Value (NPV), Equivalent Annual Cost and
Loan Redemption

33

3.1

Nominal Interest Rate and Real Interest Rate

33

3.2

Compound Interest Calculations

35

3.3

Beneit-Cost Ratio

43

3.4

Salvage Value and Equivalent Annual Cost

43

3.5

Redeeming a Loan

46

3.6

Principal Amortization and Interest Payment of a Loan

49

4

Internal Rate of Return (IRR) and the Diferences between IRR and NPV

53

4.1

Net Cash Flow (NCF)

53

4.2

DCF Method and IRR

54

4.3

IRR versus NPV

57

4.4

IRR as Financial Indicator and NPV as Economic Indicator

61

5

Efect of Inlation

66

5.1

Introduction

66

5.2

Real IRR and Its Calculation in a World with Inlation

66

5.3

When Is Inlation Adjustment Considered Or Not Considered?

69

5.4

Concluding Remarks

71

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