Business FinancesQuestion 328 of 1632
A contractor wants to keep a cash reserve equal to 2 months of fixed overhead. If monthly fixed overhead is $14,000, how large should the reserve be?
a.$7,000
b.$14,000
c.$16,000
d.$28,000
Explanation
Cash reserve = 2 × Monthly Fixed Overhead = 2 × $14,000 = $28,000. Maintaining a reserve helps the contractor cover overhead during slow periods or payment delays.
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Reviewed by Abraham Chen — Licensed California General Contractor (CSLB License #1101856 — verify)