Financial Equations Practice
I'm working toward testing and I'm having a hard time finding resources to practice the financial equations in AHPP so I have experience with them before testing.
Does anyone know of a resource on how to practice these? does Architect's Guide to Small Firm Management have practice questions? From their table of contents it looks like that book's contents are mostly covered by AHPP and my other study materials so I haven't purchased it.
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Sara,
I have all of the equations written down and working on memorization of them. My issue is that I'm looking for practice questions for the equations. I feel like I'm being asked to learn math but am being graded solely on the first homework assignment - how am I supposed to do any of the problems on the test under time pressure if the first time I'm ever doing the problems is on the test?!?
Basically I'm frustrated.
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Financial Equations
One of my examples from Amber Book, With an answer, is below. These are the most important financial equations to know for the licensure exam. . . .
and the answers are. . . .
So graphically, it looks like this. . . .
Direct salary: portion of my salary that is paid by the client (your pay for hours on the project). Indirect salary: portion of salary that cannot be charged to a client (your pay for hours rearranging the office furniture to make room for a new hire). So for one senior architect, base salary (what he is paid: $120,000) minus indirect salary (his pay for managing internal office administration: $20,000) equals direct salary (his pay for working with clients: $100,000). . . . Direct salary (his pay for working with clients: $100,000) times direct salary expense multiplier (to cover direct salary + benefits + overhead + profit, in this example 3.0) equals billable revenue (what the client is paying for his time: 300,000). Overhead rate equals office overhead/total direct labor, so an overhead rate of 1.50 means that for every dollar we pay in direct salary, we also pay an additional $1.50 for health insurance benefits, rent, copier repair, etc. This gets us to our break-even multiplier: $1+$1.50=$2.50, which is what we need to charge per dollar of direct salary to break even (doesn’t include a profit yet). Revenue factor: fee revenue generated for each dollar spent on payroll. This is a good measure of efficiency because a higher number means that you are commanding high fees or not wasting time or both. Utilization rate: direct labor/total labor (70% utilization rate means that 70% of staff time is billable). Quick ratio measures liquidity (how easily you could turn your business into cash): a number higher than 1.0 means that there is more available money than debt. Schedule performance index (SPI): earned value/planned value; a number less than one means that, at this point in the work, you have given more hours to a project than you had planned to.
—Michael Ermann, Amber Book creator.
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Hi Karen - I understand your frustration. I failed PCM the first time, passed on my second attempt. While studying for the second round, I focused on the finances quite a bit from the AHPP. That said, my best tip for you is to know, and understand how to apply those equations to a given problem; try to come up with some hypothetical questions and think critically about why certain pieces of information are important, while others are not. I honestly didn't have much business-finance experience going into this exam.
The AHPP seemed to provide nearly all the "book" knowledge you'd need. The questions on the exam seemed to be variations of what I encountered in the AHPP or ARE 5.0 Candidate Handbook, but often I had to piece together the information in order to actually solve the question.
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M. Ermann: Wow, thank you! I'll look over this information carefully and incorporate it into my studying! I really appreciate your images!
M. Teller: Thanks for this info. In light of not finding any other resources in my hunt I'm pretty sure this is how i'm going to have to proceed with my studying which is just frustrating. I understand the equations fairly well and know how they are applied and used, I'm just concerned about how they will come up on the test and how to prepare for that.
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I encountered the same issue, I found WEARE has a short quizzes focused on Finance, also the author of Architect's Guide to Small Firm Management did a webinar about the finance and it includes a useful illustration and examples.
Also Hyperfine has a special course about finance includes several examples.
I'm practicing now Archiprep but didn't reach financial section.
I didn't pass the exam yet, I were studying on and off for long time. Hopefully I'll take the exam one month after the pandemic.
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To the OP and others looking for financials practice materials, I HIGHLY recommend Eric Walkers practice exam, walking the ARE, and the Hyperfine exercises. Both very helpful for PcM/ PjM. https://gumroad.com/l/PcM-PA Hyperfinearchitecture.com
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