FINANCIAL MANAGEMENT IN

CONSTRUCTION

CHAPTER 3
FIRM’S FINANCIAL OPERATIONS
 CONTENTS
FIRM’S FINANCIAL OPERATIONS

1. Financial Statements
2. Financial Analysis
3. Cash Flow Management

2
1. Financial Statements

1.1 General
 Financial information is vital for decision
making.
 A financial Statements are the products of the
accounting process ,which reveals the financial
results of specific period and financial position
as on particular date .
 Financial statements summarize the financial
activities of the business.
 Financial statements paint a picture of the
transactions that flow through the business.
3
1. Financial Statements
1.2 Uses of Financial Statements
 Financial statements have the following uses to:
 Present a historical record of the firm‟s
financial development when complied over a
number of years;
 Forecast a course of action for the firm.
Financial statement can be prepared for a
future period. It expresses the financial
manager‟s estimate of the firm’s future
performance; and
 A means employed by firms to present their
financial situations to stockholders, creditors
and the general public.

4
1. Financial Statements
1.3 Purpose of Financial Statements
 The main purpose of financial statements is to inform the
following parties of the financial performance and
position of the entity:
 Management:– for reviewing their performance
during the reporting period;
 Shareholders:– for assessing the worth of their
investments and reviewing the effectiveness of the
Management;
 Investors:– for judging the worth of the entity before
deciding to invest;
 Suppliers and Lenders:– for judging the
creditworthiness of the entity before deciding to
extend credit; and
 Government:– for calculating the amount of tax to be
collected.
5
1. Financial Statements
1.4 Forms of Financial Statements

Income Statement

Balance Sheet
FOUR TYPES
OF
FINANCIAL
STATEMENTS Statement of Cash Flows

Statement of retained earnings

6
 1.4 Forms of Financial Statements

Time periods covered

Balance sheet Balance sheet Balance sheet Balance sheet

31/12/20X1 31/12/20X2 31/12/20X3 31/12/20X4

Income statement Income statement Income statement

20X2 20X3 20X4

7
 1. Financial Statements

1.4.1 Balance Sheet

THE BALANCE SHEET SUMMARIZES:

What a business What a business What a business

owns owes is worth

Balance Sheet
A report of the balances in the permanent
accounts on a specific date.
8
1.4.1 Balance Sheet

 Balance Sheet

SECTIONS OF THE BALANCE SHEET

Liabilities and
The Heading Assets Owner’s Equity

WHO The name of the business

WHAT The name of the financial statement

WHEN The date of the balance sheet

9
 1.4.1 Balance Sheet
 The balance sheet is a statement which shows the
financial position of a company at the end of a certain
reporting period, which is the fiscal year. (snapshots
on a specific period.)
 It mainly shows the assets, liabilities and stockholders
equity, based on the accounting equations:
Assets = Liabilities + Owner’s equity
 It declares the assets, liabilities and equity for the firm
at the last day of the accounting period,
 It matches resources (assets) with sources (liabilities
and equity).
 Another way to state the equation:
Uses of resources = Sources of resources
 Liabilities and owners' equity are the sources from which
the firm has obtained its funds.
 The listing of assets shows the way that the firm„s
10
managers have put those funds to work.
 1. Financial Statements
1.4 Forms of Financial Statements
1.4.1 Balance Sheet
A. Assets
 Asset represents how much a company owns at a given
time of reporting, usually the budget year.
i. Current Assets:
 It includes cash and properties that can be converted to
cash in less than a year.
 Cash includes the following:
 Cash on hand
 Deposit in checking accounts and saving accounts
 Money market funds permitting withdrawal by check
 Checks from customers awaiting deposit
 Foreign currency which can be converted into birrs.
11
1. Financial Statements
1.4 Forms of Financial Statements
1.4.1 Balance Sheet
A. Assets
 Marketable Securities
 Many firms put excess cash balances into short-term
investments, known as marketable securities.
 They consist of stocks and bonds easily sold through a
broker.
 Accounts receivable: money due but not yet
received:
o Approved payment certificates; and
o Materials delivered.
 Inventory: amount invested for purchasing materials,
materials on site, Paid delivery orders, etc. 12
1. Financial Statements
1.4 Forms of Financial Statements
1.4.1 Balance Sheet
A. Assets
ii. Fixed Assets:
 These are permanent properties, which can not be easily
converted to cash within a year,
 Plant and Equipment: This includes building, cars,
machinery and other equipments and are adjusted by the
depreciation record.
 Real Estate (if any): This account lists the property owned
by the firm. (Land)
 Intangible Assets:Patents, which protect invention,
copyrights, which protect artistic works, and goodwill are
examples of intangible assets.
 Goodwill may only be recorded when one business buys
13
another business.
1. Financial Statements
1.4 Forms of Financial Statements
1.4.1 Balance Sheet
B. Liabilities
 Liabilities are funds that a company owes like loans.
 It represents sources of assets since the firm either
borrows the money or make use of certain assets that
have not yet been paid for.
i. Current Liabilities
 All debts that need to be settled in a very short period,
usually within a year like accounts and notes payable in a
year, accrued expenses which include:
 Accounts payable: when a firm makes purchase on
credit,
 Short-term notes payable: promissory notes that
mature in one year,
 Other payables: accruals (wages payable), tax
liabilities. 14
1. Financial Statements
1.4 Forms of Financial Statements
1.4.1 Balance Sheet
B. Liabilities
ii. Long Term Liabilities
 Liabilities that will not be paid off during the next year.
 This includes the long-Term secured and unsecured
financing which covers mortgage and notes where a
building or other Fixed assets are pledged as specific
collateral for debts.
C. Stock Holders Equity
 This is part of the assets of the company, which is
provided by the owners (investors). Thus it is considered
as a liability to the company.
 Preferred Stock,
 Common Stock,
 Contributed or paid in capital, and
 Retained earnings. 15
1. Financial Statements
1.4 Forms of Financial Statements
1.4.2 Income Statement
 It is a form of financial statement that shows whether the
company has made or lost money during that reporting
period.
 Income statements can be prepared monthly, quarterly,
etc. However, usual accounting periods extend to one
year, which is the fiscal year.
 It shows the revenues and expenses of the firm, the effect
of interest and taxes and the net income for the period.
 It may be called as the profit-and-loss statement or the
statement of earnings.

16
1. Financial Statements
1.4 Forms of Financial Statements
1.4.2 Income Statement
 The balance sheet offers a view of the firm at a moment
in time, whereas the income statement summarizes the
profitability of operations over a period of time.
 It is an accounting device designated to show
stockholders and creditors whether the firm is making
money.
 It can also be used as a tool to identify the factors that
affect the degree of profitability.
 Spans a period of time (Represents the transactions that
occur between two balance sheets).

17
1.4.2 Income Statement

 Income Statement

The Heading

SECTIONS OF The Revenue for the Period

THE INCOME
STATEMENT
The Expenses for the Period

The Net Income or Net Loss

for the Period

income statement
A report of the net income or net loss for a specific period; sometimes
called a profit-and-loss statement or
earnings statement.
18
1.4.2 Income Statement

 Income Statement

19
1.4.2 Income Statement

 Revenue
 Construction Costs
 Equipment Costs
Gross Profit (Revenue – Const. Costs – Equip. Costs)
 Overhead
Net Profit From Operations (Gross Profit – Overhead)
 Other Income and Expense
Profit Before Tax (Net Profit – Other Income and Expense)
 Income Tax
Profit After Tax (Profit Before Tax – Income Tax)

20
1.4.2 Income Statement

 CONSTRUCTION COSTS
 Materials
 Labor
 Passes through payroll system and is charge to a
job
 Subcontract
 Always includes labor component
 Equipment
 Other
21
1.4.2 Income Statement
Equipment Costs
 Rent and Lease Payments
 Depreciation
 Repairs and Maintenance
 Fuel and Lubrication
 Taxes, Licenses, and Insurance
 Total Equipment Costs

22
1. Financial Statements
1.4 Forms of Financial Statements
1.4.2 Income Statement
A. Revenue
 Revenues are earnings from the sale of goods ,works or
services to customers.
 Revenue is recognized in the period in which goods and
services are sold, not necessarily the period in which
cash is received.
B. Expense
 Expenses are the dollar amount of resources used up by
the entity to earn revenues during a period.
 An expense is recognized in the period in which goods
and services are used, not necessarily the period in which
cash is paid.

23
1. Financial Statements

1.4 Forms of Financial Statements

1.4.3 Cash Flow Statement
 Cash flow statement shows the movement of
funds into the firm’s current asset accounts
from external sources such as stockholders,
creditors and customers.
 It also shows the movement of funds to meet the
firm’s obligation, or pay dividends.

24
1. Financial Statements
1.5 Reporting Format
1.5.1 Operating Activities
 The operating cash flow represents all cash flows related
to the production and sales of goods and services.
1.5.2 Investing Activities
 These include cash flow related to:
 Purchase of new fixed assets (outflow); and
 Reselling an old equipment (inflow).
1.5.3 Financing Activities
 These include cash flow related to:
 Purchasing stocks (outflow);
 Selling stocks (inflow); and
 Paying loans (outflow).

25
 1. Financial Statements
1. Sample: Financial Statements (Balance Sheet)
Owns Owes

Assets Liabilities and Equity

 Current assets:  Current liabilities:
 Cash & securities  Payables
 Receivables  Short-term debt
 Inventories  Long-term liabilities
 Fixed assets:  Shareholders' equity
 Tangible assets
 Intangible assets

26
1. Name of1. Financial Statements
entity ABC Construction
2. Title of statement Balance Sheet
3. Specific1.6
date At December
Sample: Financial Statements 31, 2022
(Balance Sheet)
4. Unit of measure (in thousands of dollars)
Assets
Cash $ 4,895
Accounts receivable 5,714
Inventories 8,517
Plant and equipment 7,154
Land 981
The Balance Total assets $ 27,261
Sheet reports Liabilities and Stockholders' Equity
the financial Liabilities
Accounts payable $ 7,156
position of an
Notes payable 9,000
entity at a Total liabilities $ 16,156
particular Stockholders' Equity
point in time. Contributed capital $ 2,000
Retained earnings 9,105
Total stockholders' equity 11,105
Total liabilities and stockholders' equity $ 27,261
27
 ABC Construction
1. Financial Statements Balance Sheet
At December 31, 2022
1.6 Sample: Financial Statements (Balance
(in thousands Sheet)
of dollars)
Assets
Use $ on the Cash $ 4,895
Accounts receivable 5,714
first item in a
Inventories 8,517
group Plant and equipment 7,154
and on the Land 981
group total. Total assets $ 27,261
Liabilities and Stockholders' Equity
Liabilities
Accounts payable $ 7,156
Notes payable 9,000
Assets = LiabilitiesTotal
+ Stockholders’
liabilities Equity $ 16,156
Stockholders' Equity
Contributed capital $ 2,000
Retained earnings 9,105
Total stockholders' equity 11,105
Total liabilities and stockholders' equity $ 27,261
28
1. Financial Statements
1.6 Sample: FinancialStatement
The Income Statements( income statement)
reports the
revenues less expenses of the
accounting period.
Cost of The cost to produce products sold this
goods sold period. Production costs: direct costs
Selling,
Operating expenses not directly related
general and
to production.
administrative
Research and Expenses incurred to develop new
development products.
Interest
The cost of using borrowed funds.
expense
Income tax Income taxes on current period’s pretax
expense income. 29
 ABC Construction
1. Financial Statements
Income Statement
For the
1.6 Sample: Year Ended
Financial December
Statements 31,Sheet)
(Balance 2022
(in thousands of dollars)

Revenues
Sales revenue $ 37,436
Expenses
Cost of goods sold $ 26,980
Selling, general and administrative 3,624
Research and development 1,982
Interest expense 450
Total expenses 33,036
Pretax income $ 4,400
Income tax expense (25% of pretax
income) 1,100
Net income $ 3,30030
1. Financial Statements
1.6 Sample: Cash Flow Statements
 The Statement of Cash Flows reports the inflows and
outflows of cash during the period in the categories of
operating, investing, and financing.
Cash Flow Statement Classifications
“Natural” Cash Flows
Sell Equity Sell Equity
Issue Debt Issue Debt Financing
<Pay Dividends>
<Buy Assets>
<Buy Inventory>
<Buy Assets> Investing
Make Sales!
<Pay Costs>
<Pay Taxes> Make Sales!
<Buy Inventory>
<Pay Interest> <Pay Costs> Operating
<Pay Dividends> <Pay Taxes>
<Pay Interest>
=NET CASH FLOW
31
1. Financial Statements
1.6 Sample: Cash Flow Statements
Cash collected from customers $ 33,563
Cash paid to suppliers and employees (30,854)
Cash paid for interest (450)
Cash paid for taxes (1,190)
Net cash flow from operating activities $ 1,069
Cash flow from investing activities:
Cash paid to purchase equipment $ (1,625)
Net cash flow from investing activities (1,625)
Cash flow from financing activities:
Cash received from bank loan $ 1,400
Cash paid for dividends (1,000)
Net cash flow from financing activities 400
Net decrease in cash during the year $ (156)
Cash at beginning of the year 5,051
Cash at end of the year $ 4,895

32
 1. Financial Statements
1.7 Relationship Among Financial Statements
ABC Construction
Income Statement
For the Year Ended December 31, 2022
Net income from the income
(in thousands of dollars) statement increases ending
Revenues
Sales revenue $ 37,436
retained earnings on the
Expenses
Cost of goods sold $ 26,980 statement of retained
Selling, general and administrative 3,624
Research and development 1,982 earnings.
Interest expense 450
Total expenses 33,036
Pretax income $ 4,400
Income tax expense 1,100
Net income $ 3,300
ABC Construction
Statement of Retained Earnings
For the Year Ended December 31, 2022
(in thousands of dollars)

Retained earnings, January 1, 2022 $ 6,805

Net income for 2022 3,300
Dividends for 2022 (1,000)
Retained earnings, December 31, 2022 $ 9,105
33
 1. Financial Statements
1.7 Relationship Among Financial Statements
ABC Construction
Balance Sheet
At December 31, 2022
Ending retained earnings from the
(in thousands of dollars) statement of retained earnings is one of
Assets the components of stockholders’ equity on
Cash $ 4,895
Accounts receivable 5,714 the balance sheet.
Inventories 8,517
Plant and equipment 7,154 The statement of Retained Earnings reports the way
Land 981
Total assets $ 27,261
that net Income and the distribution of dividends
Liabilities and Stockholders' Equity affect the financial position of the company during a
Liabilities period
Accounts payable $ 7,156
Notes payable 9,000
Total liabilities $ 16,156 ABC Construction
Stockholders' Equity
Contributed capital $ 2,000
Statement of Retained Earnings
Retained earnings 9,105 For the Year Ended December 31, 2022
Total stockholders' equity 11,105 (in thousands of dollars)
Total liabilities and stockholders' equity $ 27,261

Retained earnings, January 1, 2022 $ 6,805

Net income for 2022 3,300
Dividends for 2022 (1,000)
Retained earnings, December 31, 2022 $ 9,105
34
 1. Financial Statements
1.7 Relationship Among Financial Statements
ABC Construction
ABC Construction
Balance Sheet
Statement of Cash Flows
At December 31, 2022
(in thousands of dollars) For the Year Ended December 31, 2022
Assets (in thousands of dollars)
Cash $ 4,895
Accounts receivable 5,714 Cash flows from operating activities:
Inventories 8,517 Cash collected from customers $ 33,563
Plant and equipment 7,154 Cash paid to suppliers and employees (30,854)
Land 981 Cash paid for interest (450)
Total assets $ 27,261 Cash paid for taxes (1,190)
Liabilities and Stockholders' Equity Net cash flow from operating activities $ 1,069
Liabilities Cash flow from investing activities:
Cash paid to purchase equipment $ (1,625)
Accounts payable $ 7,156
Net cash flow from investing activities (1,625)
Notes payable 9,000 Cash flow from financing activities:
Total liabilities $ 16,156 Cash received from bank loan $ 1,400
Stockholders' Equity Cash paid for dividends (1,000)
Contributed capital $ 2,000 Net cash flow from financing activities 400
Retained earnings 9,105
Net decrease in cash during the year $ (156)
Total stockholders' equity 11,105
Cash at beginning of the year 5,051
Total liabilities and stockholders' equity $ 27,261
Cash at end of the year $ 4,895

The change in cash on the statement of cash flows added to the

beginning of the year balance in cash equals the ending balance in
cash on the balance sheet. 35
2. Financial Analysis
2.1 General
 After the monthly financial statements are completed, a
financial analysis by ratios can be performed.
 The contractor will need to use the Balance Sheet to calculate
these ratios in determining the performance of the company.
 Financial analysis is done to find firm’s financial strengths
and weaknesses through the assessment of the firm‟s past,
present and future financial conditions
 If properly analyzed and interpreted, financial statements
can provide valuable insights into a firm‟s performance.
 Analysis of financial statements is of interest to:
 Lenders (short-term as well as long-term):to determine
creditworthiness
 Investors; to estimate future cash flows and risks
 Managers: to identify areas of weakness and strength
 public and others.
36
2. Financial Analysis
2.1 General
 Financial statements analysis is helpful in assessing:
 Corporate excellence;
 Judging creditworthiness;
 Predicting bankruptcy and assessing market risks.
 It should analyze ratios based upon standards of
comparison such as:
 Industry ratios and standards;
 Similar businesses in the same industry (competition);
 Past performance ratios

37
2.2 Ratio Analysis
 Liquidity: can we make required payments?
Measure the short-term ability of the enterprise
to pay its maturing obligations and to meet
unexpected needs for cash.
 Debt management: Right mix of debt and
equity?
 Asset management: Right amount of assets vs.
Sales?
 Profitability: Do sales prices exceed unit costs,
and are sales high enough as reflected in PM,
ROE, and ROA?
38
 2. Financial Analysis
2.3 Liquidity Analysis
 Working capital is the excess of current assets to current
liabilities. It means that there exists a convertible asset to
meet current obligations.
 The net working capital shows the extent of the liquidity
of the company.
 Liquidity or the amount of working capital of a company
is of interest to short term creditors as they need their
payments to be effected in a short period of time.
2.3.1 Current Ratio
 Indicates short-term debt-paying ability.
 A good value of current ratios is difficult to give, but it is
good if it ranges between 1 and 2. It mainly depends on the
nature of operation and composition of assets existing.
Current assets
Current Ratio 
Current liabilities 39
2. Financial Analysis
2.3 Liquidity Analysis
2.3.2 Quick or Acid Test Ratio
 It is calculated by deducting inventory from current assets
as a proportion of current liabilities
 Indicates immediate short-term debt-paying ability.
 It shows the ability of the company to settle its current
liabilities immediately. Good value is greater than 1.

Quick assets include Cash,

Marketable Securities, Accounts Receivable and current
Notes Receivable.
This ratio measures a company’s ability to meet obligations
without having to liquidate inventory.

Current assets - Inventories

Quick Ratio 
Current liabilities 40
2.4 Debt Management Analysis (Leverage Ratio)

 This helps to see how a company manages or uses its

debt and its ability to meet its repayment obligations.
2.4.1 Debt Ratio (DR)
 The ratio of total debts to total assets: measures the
percentage of funds provided by creditors.
Total Debt
Debt Ratio 
Total Assets
 This shows the proportion of the company’s asset
that has been financed through debt.
 If DR = 1, it implies that all assets are financed
through debt.
 A firm has to try to keep DR as low as possible to
attract further financing from creditors.
41
2.4 Debt Management Analysis (Leverage Ratio)

 2.4.2 Debt Equity Ratio

 Measures the extent of borrowing by the firm as a

proportion of the investment of its own.
 Debt financing relative to equity financing.

Long term Debt

Debt Ratio = ----------------------------------------
Equity( shareholders‟ fund)

42
2.4 Debt Management Analysis (Leverage Ratio)
2.4.3 Times – Interest – Earned Ratio (TIER)
 The ratio of earnings before interest and taxes (EBIT)
to interest charges; a measure of the firm’s ability to
meet its annual interest payments.

EBIT
Interest Coverage Ratio 
Interest charges
 This ratio is very helpful for long time creditors.

43
2. Financial Analysis
2.5 Asset Management Analysis
 The asset management ratios measures how effectively
the firm is managing its assets.
 Too many assets:- to high cost of capital; and
 Too low assets:- less profitable sales.
2.4.1 Inventory Turnover Ratio (ITR)
 It measures how many times the company sold and
replaced its inventory during the period.
 The higher ITR the less stock holding & money is not
tied.

Sales
Inventory Turnover Ratio 
Inventories

44
2. Financial Analysis
2.4 Asset Management Analysis
2.4.2 Days Sales Standing Ratio (DSSR)
 It shows the average collection period of credits.
 The lesser it is the more turnover it makes.
Accounts Receivable
Days Sales Standing Ratio 
Turnover
2.4.3 Total Assets Turnover Ratio (TATR)
 It shows how effectively the total assets are used to
generate revenues.
 The lesser the value of TATR the more is the investment
on inventory, plant and equipment and is not good.
 Measures how efficiently assets are employed.
Sales
Total Asset Turnover Ratio 
Total Assets
45
2. Financial Analysis
2.4 Asset Management Analysis
2.4.4 Fixed Assets Turnover Ratio (FATR)
 It measures how efficiently fixed assets are employed

Sales
Fixe Asset Turnover Ratio 
Net fixed assets

46
2. Financial Analysis
2.6 Profitability Analysis
 This is a method to show how profitable a company is.
 A group of ratios that show the combined effects of
liquidity, asset management, and debt on operating
results.
2.5.1 Gross Profit Margin Ratio (GPMR)
 This ratio shows the margin left after meeting production
costs.
 It measures the efficiency of production and pricing.
 Lower values indicate less efficient operation, heavy
debt and large inventory volume.
Gross profit(Sales - Cost of Goods sold)
Gross Profit Margin 
Income

47
 Exercise
The financial statements of XYZ CONSTRUCTION FIRM are
given below

48
Refer to the financial statements of XYZ
CONSTRUCTION FIRM
1. calculate :
Liquid Ratios for 2019
Leverage ratios for 2019
Asset Management ratios for 2019
Profitability ratios for 2019
2. Try to comment the firm‟s financial
position based on ratio results.

49
 3. Cash Flow Management
3.1 Project Cash Flow
 Cash flow is one of the main financial tool that shows the
incoming, outgoing and net balance of the flow of
money in different forms.
 Cash Flow Components
 Financial Sources / in flows
 Financial Expenses / out flows
 Cash flow net balance
 Financial Sources: Cash Inflows

 Payments, Supplier‟s Credits, Loans etc.

 Financial Expenses: Cash Outflows

 Direct expenses (Materials, Labor & Equipment Costs)

 Indirect Costs Expenses (Project and Head Office

Overheads) etc. 50
 3. Cash Flow Management
3.2 Procedure to Cash Flow Preparation
 The gross bill value (contract amount) and
its time of submission (S- curve).
 Direct cost
 The margin: The margin (profit margin or
contribution) is the excess over costs.
 The measurement period; it is usual for the
contractors to be paid on a monthly basis. This is
given in contacts in the “Terms of Payment”.
 Certification time taken allowed for in the
contract. In most cases owner takes about 3-
4weeks time to process the bill and release the
payment to the contractor.
51
3. Cash Flow Management
 Retention:
 Percentage of Retention; and
 Recovery (repayment) period of retention
usually corresponding to the defects liability
period.
 Advance Payments:
 Percentage of Advance and mode of payment;
and
 Advance repayment (recovery for the owner).
 Spontaneous Financing arrangement for Direct
Resources:
 Credit for labor, material, and plant; and
 Subcontractors certification period.

52
3. Cash Flow Management
3.4 Factors Affecting Project Cash Flow
 Project cash flow is affected by the following factors:
 Advances such as Mobilization Advance etc.
 The Margin in a project,
 Retention,
 Extra claims,
 Distribution of margin such as front loading or back
loading;
 Certification type such as over measurement and under
measurement;
 Certification Period; and
 Credit Arrangement of the contractor with labor,
material, and plant and equipment suppliers, and other
subcontractors.

53
 EXAMPLE: PROBLEM STATEMENT

 Advance payment of 5,000,000.0 Birr, to be recovered in 5 equal

installments from the third Running Account bills onwards.
 The total cost for the contractor to execute a particular item is 90% of
their quoted rates.
 The total cost for a particular item consists of:
• labor (20%),
• material (55%),
• plant and machinery (10%),
• subcontractor cost (10%), and
• project overheads (5%)
 Assume that there is no delay in payment towards labor costs and
overhead costs, but a delay of one month occurs in paying to the
subcontractors, material suppliers, and plant and machinery supplier.
 Retention is 10% of billed amount in every bill. 50% retention
amount is payable after one month of practical completion while the
remaining 50% is payable six month later.
 Further it is also assumed that owner delays the payment by one
month.
54
 BILL OF QUANTITY

No Item description Unit of Quantity Unit Rate Amount

measurement (Birr) (‟00000Birr)
1 Earthwork - All Soils m3 5000 100 5
2 Concrete - PCC & RCC m3 2000 4000 80
3 Centering & Shuttering m2 14000 300 42
4 Reinforcement & Structural steel kg 250 45000 112.5

5 Brickwork m2 1700 2000 34

6 Plastering - All types m2 20000 75 15
7 Painting - All Types m2 5000 100 5
8 Flooring - All Types m2 LS LS 110
9 Waterproofing works m2 LS LS 12
10 Aluminum work m2 300 4500 13.5
11 Electrical work lm 1 LS 35
12 Sanitary & Plumbing works lm 1 LS 20
13 Road Works m2 LS LS 16
Total 500
Amount

55
Schedule of works as %age of total amount of each work
No Item description Duration 1 2 3 4 5 6 7 8 9 10

5 15 20 25 25 10
1 Earthwork - All Soils 6
10 20 20 25 15 10
2 Concrete - PCC & RCC 6
10 20 20 25 15 10
3 Centering & Shuttering 6
10 20 20 25 15 10
4 Reinforcement & Structural steel 6
10 15 20 20 20 10 5
5 Brickwork 7
10 15 20 20 20 10 5
6 Plastering - All types 7
10 15 20 20 20 10 5
7 Painting - All Types 7
10 15 20 20 20 10 5
8 Flooring - All Types 7
50 50
9 Waterproofing works 2
25 25 25 25
10 Aluminum work 4
25 25 25 15 10
11 Electrical work 5
5 10 15 20 15 15 10 10
12 Sanitary & Plumbing works 8
50 50
13 Road Works 2
56
 Schedule of works as percentage of total amount of each work
Amount (‟00000Birr)
No Item description Amount M1 M2 M3 M4 M5 M6 M7 M8 M9 M10
1 Earthwork - All Soils 5 0.25 0.75 1 1.25 1.25 0.5
2 Concrete - PCC & RCC 80 8 16 16 20 12 8
3 Centering & Shuttering 42 4.2 8.4 8.4 10.5 6.3 4.2
Reinforcement & Structural
4 steel 112.5 11.3 22.5 22.5 28.125 16.875 11.25
5 Brickwork 34 3.4 5.1 6.8 6.8 6.8 3.4 1.7
6 Plastering - All types 15 1.5 2.25 3 3 3 1.5 0.75
7 Painting - All Types 5 0.5 0.75 1 1 1 0.5 0.25
8 Flooring - All Types 110 11 16.5 22 22 22 11 5.5
9 Waterproofing works 12 6 6
10 Aluminum work 13.5 3.375 3.375 3.375 3.375 0 0
11 Electrical work 35 0 8.75 8.75 8.75 5.25 3.5
12 Sanitary & Plumbing works 20 1 2 3 4 3 3 2 2
13 Road Works 16 8 8
TOTAL 500 0.25 24.2 52.3 68.25 92.55 92.6 85.38 50.525 21.95 12

57
 Monthly and Cumulative invoice

M1 M2 M3 M4 M5 M6 M7 M8 M9 M10

TOTAL 0.25 24.2 52.3 68.25 92.55 92.6 85.38 50.525 21.95 12

CUM 0.25 24.45 76.75 145 237.55 330.15 415.5 466.05 488 500

600

500
cash due ('00000)

400

300

200

100

0
0 2 4 6 8 10

month

58
 A. CASH INFLOW

t=0 M1 M2 M3 M4 M5 M6 M7 M8 M9 M10 M11 M15 M16

Work done by
measurement 0.25 24.2 52.3 68.25 92.55 92.6 85.38 50.525 21.95 12

Recoveries towards
advance payment of
50 10 10 10 10 10

Retention @ 10% of
gross invoice (0.1*
row 1) 0.03 2.42 5.23 6.83 9.26 9.26 8.54 5.05 2.20 1.20
Payment due (1-2-3) 0.23 21.78 37.07 51.43 73.30 73.34 66.84 45.47 19.76 10.80

Cash received (one

month delay) 0.23 21.78 37.07 51.43 73.30 73.34 66.84 45.47 19.76 10.80

Release of retention 25.00 25.00

Total Incomings 50.00 0.00 0.23 21.78 37.07 51.43 73.30 73.34 66.84 45.47 19.76 35.80 25.00

Cumulative
incomings 50.00 50.00 50.23 72.01 109.08 160.50 233.80 307.14 373.97 419.45 439.2 475.00 475 475 500.00

59
 B. Cash Outflow
t=0 M1 M2 M3 M4 M5 M6 M7 M8 M9 M10 M11 M15 M16
Cumulative
incomings 50 50 50.225 72.01 109.075 160.5 233.8 307.1 373.97 419.4 439.2 475 475 475 500
Work done by
measurement 0.25 24.20 52.30 68.25 92.55 92.60 85.38 50.53 21.95 12.00
Total cost (0.9 of total
bill) 0.23 21.78 47.07 61.43 83.30 83.34 76.84 45.47 19.76 10.80
Labor @ 20% of total
cost 0.05 4.36 9.41 12.29 16.66 16.67 15.37 9.09 3.95 2.16
Material @ 55% of total
cost 0.12 11.98 25.89 33.78 45.81 45.84 42.26 25.01 10.87 5.94
Subcontractors @ 10%
of total cost 0.02 2.18 4.71 6.14 8.33 8.33 7.68 4.55 1.98 1.08
Plant & machinery @
10% of total cost 0.02 2.18 4.71 6.14 8.33 8.33 7.68 4.55 1.98 1.08
Project overheads @
5% of total cost 0.01 1.09 2.35 3.07 4.16 4.17 3.84 2.27 0.99 0.54
Labor Payment (no
delay) 0.05 4.36 9.41 12.29 16.66 16.67 15.37 9.09 3.95 2.16
Material payment (one
month delay) 0.12 11.98 25.89 33.78 45.81 45.84 42.26 25.01 10.87 5.94
Subcontractors
Payment (one month
delay) 0.02 2.18 4.71 6.14 8.33 8.33 7.68 4.55 1.98 1.08
Plant & machinery
payment (one month
delay) 0.02 2.18 4.71 6.14 8.33 8.33 7.68 4.55 1.98 1.08
Overhead cost
payment (no delay) 0.01 1.09 2.35 3.07 4.16 4.17 3.84 2.27 0.99 0.54
Outgoing Total 0.06 5.61 28.10 50.66 66.89 83.31 81.71 69.00 39.04 17.52 8.10
Cumulative Outgoings 0.06 5.67 33.78 84.44 151.33 234.63 316.35 385.34 424.39 441.9 450.0 450.0 450.0 450.0
Cumulative cash flows 50.00 49.94 44.55 38.23 24.64 9.17 -0.84 -9.21 -11.37 -4.94 -2.70 25.00 25.00 25.00
60
50.00
 Cash Flow Diagram

60.00

50.00

40.00
cash due ('000)

30.00

20.00

10.00

0.00

-10.00

-20.00
0 2 4 6 8 10 12 14 16 18

month

61