C. Financial Management

Question 1

The _____ is used to estimate future needs. It gives the manager a basis for CONTROL. Must be flexible according to changes.

Usually reviewed monthly.

Answer 1

Budget

Question 2

This type of budget is used to forecast revenue (income), expenses, and profit for a specific period of time.

Answer 2

Operating budget

Question 3

**This type of budget projects revenues and expenses during the budget period; shows inflow and outflow of cash over time.

Purpose: to determine if funds will be available when needed.

Answer 3

**Cash flow budget

Question 4

**This type of budget includes equipment, facilities, and cost of improvements and repairs. Includes expenditures whose returns should last more than 1 year.

Answer 4

**Capital budget

Question 5

This method of budgeting uses the existing budget as a base and projects changes for the upcoming year by adding an inflation factor.

Control oriented.

Answer 5

Traditional (incremental) budget

Question 6

This method of budgeting is NOT based on the existing budget. It begins at ZERO. Each expense must be justified.

Planning oriented.

Answer 6

Zero-based budget (ZBB)

Question 7

This method of budgeting is prepared at ONE level of sales or revenue. Does not account for major change in customer count during the year.

Answer 7

Fixed budget

Question 8

This method of budgeting is adjusted to various levels of operation with VARYING levels of revenue. Accounts for changes in customer count throughout the year. Gives range for low to high levels of predicted activity.

Answer 8

Flexible budget

Question 9

This method of budgeting details what it costs to perform a specific activity.

Answer 9

Performance budget

Question 10

This type of cost is not affected by sales volume and is NOT DIRECTLY involved with day to day activities.

ie. rent, taxes, insurance

Answer 10

Indirect (fixed) costs

Question 11

This type of cost varies DIRECTLY with change in revenue.

ie. food, silverware, uniforms, laundry

Answer 11

Direct, variable, flexible costs

Question 12

This type of cost has both a fixed and variable component. A portion of the cost will remain fixed regardless of changes in sales volume.

ie. Labor - certain # of workers required with others added as needed.

Answer 12

Semi-variable costs

Question 13

Costs that have already incurred and cannot be recovered.

Answer 13

Sunk costs

Question 14

This cost represents the difference in cost when comparing alternative options.

Answer 14

Differential costs

Question 15

3 major factors that effect cost control:

• ____ expense
• ____ expense
• ____ expense

Answer 15

Food expense

Labor expense

Operating expense

Question 16

A method useful in resource allocation. Identifies the most critical activities, to best allocate limited resources.

Can lead to cost savings and give competitive edge.

Answer 16

Critical Path Method (CPM)

Question 17

Factors effecting food cost:

\_\_\_\_\_\_ \_\_\_\_\_ (most important)
Type of \_\_\_\_\_\_ 
\_\_\_\_\_\_ methods (ie. group buying reduces cost)
\_\_\_\_\_\_\_ control
\_\_\_\_\_\_\_ and \_\_\_\_\_ control
\_\_\_\_\_\_ portions

Answer 17

MENU PLANNING
Type of service
Purchasing methods
Receiving control
Storage and production control
Standardized portions

Question 18

• *EP: ______ _____
• *AP: ______ ______ _____

To determine the EP cost, divide the as purchased cost by the edible weight.

Answer 18

EP: Edible portion

AP: As purchased price

Question 19

Accounting (used to record transactions) method that recognizes a transaction at the time cash is received or dispersed.

Answer 19

Cash basis

Question 20

Accounting method that recognizes a transaction when incurred, regardless of when the actual cash is received or dispersed.

Answer 20

Accrual basis

Question 21

Form used in financial control and analysis that categorizes transactions by account number. Summary of all revenues and expenses by category (ie. meat, fruit, dairy).

Answer 21

General Ledger

Question 22

A statement that shoes operating results (revenue, expenses, profit) over a period of time.

AKA Profit Loss Statement or Revenue Expense Statement

Answer 22

Income Statement

Question 23

Shows financial condition as of a particular date.

*Lists ASSETS, LIABILITY, and EQUITY.

Answer 23

Balance sheet

Question 24

*________ are goods and products OWNED.

_______ are amounts owed to others.

Answer 24

*Assets

Liabilities

Question 25

The use of formulas to analyze organization’s financial position. Compares organization with similar ones. Compares ratios with projected or preceding ratios.

Answer 25

Financial ratios

Question 26

Assess ability to meet short-term debt.

Answer 26

Liquidity ratios

Question 27

Assesses current effectiveness of inventory control. Are you efficiently using the assets to produce more ratio.

Answer 27

Asset management or turnover ratios

Question 28

An example of asset management is the ______ ______ ______. Measures how often inventory is consumed and replenished (turnover). 2-4/month is desirable.

Food cost/Inventory cost

Answer 28

Inventory turnover rate

Question 29

Ratio that assesses ability to meet long-term debt.

Answer 29

Net worth ratio

Question 30

Determines the percent of income spent on food sold.

Food cost/Income

Answer 30

Food cost percentage

Question 31

Food cost per month / # meals per month

Answer 31

Food cost per meal

Question 32

Food cost includes food purchases PLUS foods _____ _____ ______ (beginning inventory - ending inventory).

Answer 32

Food purchases PLUS foods removed from invetory

Question 33

of meals produced / # of labor hours worked

Answer 33

Meals per labor hour

Question 34

The most commonly used assessment of financial efficiency. Reflects the portion of sales volume remaining after all expenses have been paid.

Net profit / Revenue

Answer 34

Profit margin

Question 35

*Profit after ALL expenses have been deducted.

Revenue - All expenses

Answer 35

*Net profit

Question 36

*Profit after deducting cost of sales.
Cost of sales = cost of raw food and beverage

Revenue - cost of sales

Answer 36

*Gross profit

Question 37

*Cost of the raw food and beverage sold.

Cost of what you are selling.

Answer 37

*Cost of sales

Question 38

The length of time it will take an organization to recover the money invested in a project/service/piece of equipment.
Time for cash inflow from a project to equal initial outlay.

Cost of project/Cash saved

Answer 38

Payback period

Question 39

The process of investigating all aspects of a service with the goal of identifying and eliminating unnecessary costs without interfering with the effectiveness of the service.

Ie. Foodservice - relationship between price paid for an item and its usefulness

Answer 39

Value analysis