Florida General Contractor Practice Exam

In the context of a construction project, what does the term "percentage of completion" signify?

1. The proportion of work completed at a given time

2. The percentage of profits taken at project completion

3. A method for valuating assets at project end

4. The ratio of costs incurred to total estimated costs

The correct answer is: The proportion of work completed at a given time

The term "percentage of completion" refers to the proportion of work that has been completed on a construction project at a specific point in time. It is a vital metric used in project management and accounting, especially for long-term contracts. This percentage allows stakeholders to understand how much of the project has been finished, which aids in assessing progress and financial status. In practical terms, reporting the percentage of completion helps in determining revenue and expenses associated with the project. For example, if a contractor has completed 40% of the project, they can recognize 40% of the total expected revenue and associated costs in their financial statements. This method provides a more accurate financial picture over time, rather than waiting until the project is fully completed. The other choices reflect concepts that are not synonymous with "percentage of completion." While they pertain to aspects of project finance or accounting, they do not capture the essence of measuring work completed at a particular moment during the project timeline.