C. Financial Management Flashcards
The _____ is used to estimate future needs. It gives the manager a basis for CONTROL. Must be flexible according to changes.
Usually reviewed monthly.
Budget
This type of budget is used to forecast revenue (income), expenses, and profit for a specific period of time.
Operating budget
**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.
**Cash flow budget
**This type of budget includes equipment, facilities, and cost of improvements and repairs. Includes expenditures whose returns should last more than 1 year.
**Capital budget
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.
Traditional (incremental) budget
This method of budgeting is NOT based on the existing budget. It begins at ZERO. Each expense must be justified.
Planning oriented.
Zero-based budget (ZBB)
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.
Fixed budget
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.
Flexible budget
This method of budgeting details what it costs to perform a specific activity.
Performance budget
This type of cost is not affected by sales volume and is NOT DIRECTLY involved with day to day activities.
ie. rent, taxes, insurance
Indirect (fixed) costs
This type of cost varies DIRECTLY with change in revenue.
ie. food, silverware, uniforms, laundry
Direct, variable, flexible costs
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.
Semi-variable costs
Costs that have already incurred and cannot be recovered.
Sunk costs
This cost represents the difference in cost when comparing alternative options.
Differential costs
3 major factors that effect cost control:
- ____ expense
- ____ expense
- ____ expense
Food expense
Labor expense
Operating expense
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.
Critical Path Method (CPM)
Factors effecting food cost:
\_\_\_\_\_\_ \_\_\_\_\_ (most important) Type of \_\_\_\_\_\_ \_\_\_\_\_\_ methods (ie. group buying reduces cost) \_\_\_\_\_\_\_ control \_\_\_\_\_\_\_ and \_\_\_\_\_ control \_\_\_\_\_\_ portions
MENU PLANNING Type of service Purchasing methods Receiving control Storage and production control Standardized portions
- *EP: ______ _____
- *AP: ______ ______ _____
To determine the EP cost, divide the as purchased cost by the edible weight.
EP: Edible portion
AP: As purchased price
Accounting (used to record transactions) method that recognizes a transaction at the time cash is received or dispersed.
Cash basis
Accounting method that recognizes a transaction when incurred, regardless of when the actual cash is received or dispersed.
Accrual basis
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).
General Ledger
A statement that shoes operating results (revenue, expenses, profit) over a period of time.
AKA Profit Loss Statement or Revenue Expense Statement
Income Statement
Shows financial condition as of a particular date.
*Lists ASSETS, LIABILITY, and EQUITY.
Balance sheet
*________ are goods and products OWNED.
_______ are amounts owed to others.
*Assets
Liabilities
The use of formulas to analyze organization’s financial position. Compares organization with similar ones. Compares ratios with projected or preceding ratios.
Financial ratios
Assess ability to meet short-term debt.
Liquidity ratios
Assesses current effectiveness of inventory control. Are you efficiently using the assets to produce more ratio.
Asset management or turnover ratios
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
Inventory turnover rate
Ratio that assesses ability to meet long-term debt.
Net worth ratio
Determines the percent of income spent on food sold.
Food cost/Income
Food cost percentage
Food cost per month / # meals per month
Food cost per meal
Food cost includes food purchases PLUS foods _____ _____ ______ (beginning inventory - ending inventory).
Food purchases PLUS foods removed from invetory
of meals produced / # of labor hours worked
Meals per labor hour
The most commonly used assessment of financial efficiency. Reflects the portion of sales volume remaining after all expenses have been paid.
Net profit / Revenue
Profit margin
*Profit after ALL expenses have been deducted.
Revenue - All expenses
*Net profit
*Profit after deducting cost of sales.
Cost of sales = cost of raw food and beverage
Revenue - cost of sales
*Gross profit
*Cost of the raw food and beverage sold.
Cost of what you are selling.
*Cost of sales
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
Payback period
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
Value analysis
