Business FinancesQuestion 1209 of 1605
The main financial risk of taking on a job much larger than a contractor's usual size is:
a.Depreciation stops
b.The CSLB automatically upgrades the license
c.Sales tax is waived
d.Insufficient working capital to carry the labor and material costs before payments arrive
Explanation
Large jobs require large outlays for labor and materials well before progress payments and retention are collected. Without adequate working capital or credit, a contractor can run out of cash mid-project even though the job is profitable on paper.
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Sen Lin, PrepPass Founder · Verified against California CSLB Contractor License Law & Business Exam · How we review
Reviewed by Abraham Chen — Licensed California General Contractor (CSLB License #1101856 — verify)