How Much Do You Know About Fortna Software?

Fortna records its accounting records on the accrual basis. This means that the company records revenues and expenses when they are earned or incurred, regardless of when the cash is actually received or paid. This method provides a more accurate representation of the company's financial position and performance over a given period of time. It allows for better matching of revenues and expenses and provides a clearer picture of the company's profitability.

When a contract is signed by both parties, the sale is considered "booked". This means that the company can now recognize the revenue from the sale in their financial statements. It indicates that the transaction has been finalized and the company can start delivering the products or services agreed upon in the contract. This term is commonly used in sales and accounting to signify that the sale has been successfully closed and the company can begin fulfilling its obligations to the client.

Fortna's Business Model aims to achieve a gross profit that is 25% of revenues. This means that the company aims to generate a profit that is 25% of the total revenue it generates. This is a key financial metric that indicates the efficiency and profitability of the company's operations. By setting a target of 25% gross profit, Fortna aims to ensure that its revenue generation is balanced with its cost of goods sold, allowing for sustainable growth and profitability.

Billable hours refer to the hours that a client is charged for by the company. In this case, the correct answer states that billable hours are charged to the client and also charged to the project. This means that the client is responsible for paying for the hours worked on the project. Additionally, the employee receives utilization credit, which means that their time spent on the project is recognized and accounted for.

The correct answer is "Travel Expenses are billed at Fortna's actual cost." This means that Fortna will bill the client for the exact amount they spent on travel expenses, without any markup or additional charges. This ensures transparency and accuracy in billing.

The explanation for the correct answer "Our industry lags the economic indicators" is that experience has shown that our industry tends to follow or trail behind the economic indicators. This means that changes in the overall economy are typically reflected in our industry after a certain time lag.

Project variances are useful to understand the differences between budgets and actual performance. Variances help in identifying the deviations between the planned budget and the actual expenses or outcomes of a project. By analyzing these variances, project managers can gain insights into the reasons behind the discrepancies and take corrective actions if necessary. This information is crucial for effective project management and decision-making, as it allows for better control over project costs and performance.

When invoices are paid by the client, they are considered collected. This means that the client has made the payment and the amount owed has been received by the company.

Fortna's services work consumes cash during periods of growth because during periods of growth, the company may need to invest in additional resources, such as hiring more employees or purchasing new equipment, to meet the increased demand for their services. These investments require cash outflows, which can temporarily reduce the company's available cash balance.

Nonchargeable hours refer to the hours that are not billed to the client. In this case, the correct answer states that the client is not charged for these hours, and the project is also not charged for the cost. This means that the nonchargeable hours do not impact the client's bill or the project's budget.

The Quick Ratio is a statistic used to determine a company's ability to meet short-term obligations. It measures a company's ability to pay off its current liabilities with its most liquid assets, excluding inventory. By comparing a company's quick assets (cash, marketable securities, and accounts receivable) to its current liabilities, the Quick Ratio provides insight into the company's liquidity and its ability to cover short-term obligations.

This is an example of a Time and Expense contract because the project is billable bi-weekly at Time and Expenses. In this type of contract, the client pays for the actual time spent on the project, as well as any expenses incurred. It is commonly used when the scope of work is uncertain or subject to change, as it allows for flexibility in billing based on the actual resources used.

The statement that "Billings need to be prompt and collections need to be monitored" is accurate because it highlights the importance of timely invoicing and tracking of payments in Fortna Cash Management. This ensures that the company receives its revenue in a timely manner and can effectively manage its cash flow.

Fortna's policy is to discourage monthly billing. This means that they do not prefer or encourage billing on a monthly basis for their consulting projects. The reasoning behind this policy is not provided, but it could be because monthly billing may lead to a longer project duration and potential delays in payment. Alternatively, Fortna may prefer to bill based on milestones or project completion to ensure timely and accurate compensation for their services.

Fixed price contracts involve a detailed estimate of total direct costs being developed by the Estimating Department. This means that the department carefully calculates and determines the overall costs that will be incurred in executing the project. This estimate is crucial in setting the fixed price for the contract and ensuring that it covers all the necessary expenses.

The most accurate description of the goal for the Fortna Standard Cost process is to have a net zero cost for a department at the end of the year. This means that the department's expenses and revenues should balance out, resulting in no overall cost or profit.

Cash flow should always be considered when negotiating a new contract because it is important to understand the financial implications of the project. By considering cash flow, the organization can assess whether they have enough funds to cover expenses and determine the profitability of the project. This information is crucial for making informed decisions during contract negotiations and ensuring the financial success of the project.

The correct answer is "Direct Cost and Indirect Cost divided by expected billable hours." This means that Fortna's Standard Cost rates include both the direct and indirect costs, which are divided by the expected billable hours. This calculation allows for a more accurate determination of the cost rates for the company's services.

Company level forecasts are not useful in tracking historical performance because forecasts are projections of future performance, not reflections of past performance. Historical performance is typically tracked through the analysis of actual financial statements and other historical data. Forecasts, on the other hand, are forward-looking estimates that are based on assumptions and expectations for the future. Therefore, the statement is false.

The purpose of the Income Statement is to provide a summary of a company's financial transactions. It is a financial statement that shows the revenues, expenses, and net income or loss of a company over a specific period of time. It helps in evaluating the profitability and financial performance of a company by showing the sources of revenue and the expenses incurred to generate that revenue. By analyzing the income statement, stakeholders can assess the company's ability to generate profits and manage its expenses effectively.