C13 Management of Financial Resources Flashcards
Auditing
Independent review of accounting records, and opinion of how accurate they are.
Cost accounting
Cost data, includes production, distribution, and service costs.
Financial accounting
Report transactions and create income statements & balance sheets based on this information.
Managerial Accounting
Includes budgeting, and financial planning for the future. Uses estimated future & historical data to do this.
GAAP
Generally Accepted Accounting Principles. Help provide consistency in the preparation of financial statements.
Business entity concept
GAAP. The business is financially separate from its owners.
The fundamental equation
GAAP. Assets = liabilities + owner equity. Must be in balance.
Going-concern concept
GAAP. A business will operate for an indefinite time, a company’s value is in its ability to generate revenue.
Money is a unit of measure
GAAP. Money is the unit of measure of revenues. Only the info that can be stated in monetary terms is included in financial statements.
Cost Principle
Transaction are based on the cost @ the time they occur.
Accrual bases of accounting
Method used to determine when a transaction should be recorded. Transaction is recognized at the time when earned, or incurred (if a cost). Most common method.
Cash bases of accounting
Method to determine when a transaction will be recored. Transaction is recored at the time of cash inflow, or outflow.
Matching revenues & expenses
Revenues and expenses relating to the same transaction are recorded in the same accounting period.
Depreciation
Based on the estimated useful life of the asset. The cost is spread out over this time.
Consistency Principle
Must use the same accounting method from period to period.
Materiality principle
Info/events must be reported for ‘if they make a difference’ to the user of the information.
Conservatism
Should favor the accounting method that states the lower net income or asset value.
Balance sheet
Statement of assets, liabilities or debts, and capital or owner’s equity at a given time or at the end of the accounting period. A statement of financial condition.
Income statement
Financial report that presents the net income or profit of an organization for the accounting period. Aka. profit and loss statement. Also reports expenses.
Uniform systems of accounts
Are standard methods of accounting and presentation of financial reports. Makes it easier to compare data with/in an industry.
Assets
Resources of a company. Current vs fixed or long-term.
Liabilities
Debts of a company. Are current, long-term, or accrued.
Owner’s equity
or capital section of the balance sheet. The money value of an company in excess of its debts that is held by the owners.
How to calculate cost of sales
Beginning inventory + Purchases = Total value of available food - Inventory at the end of period = Cost of good sold during period.
Internal standards of comparisons
Review of current performance vs budgeted, or planned performance.
External standards of comparison
Performance in relation to other operations or industries.
Ration analysis
The analysis of finical data in terms of relationships.
Liquidity ratio
Uses to determine a businesses ability to pay its bills.
Current ratio
A liquidity ratio. = current assets/current liabilities.
Acid-test ratio
A liquidity ratio. = cash = accounts receivable + marketable securities / current liabilities.
Solvency ratio
= total assets/total liabilities. Assessment of a operations ability to meet its long-term financial responsibilities.
Activity ratio
Measure of how effectively an operation is using its assets.
Profitability ratio
Measure of an operation’s ability to generate profit in relation to sales, or the investment in assets.
Operating Ratios
Analyze how well a business does at generating revenue and controlling costs.
Food cost %
An operating ratio. = cost of food/sales.
Labor cost %
An operating ratio. = cost of labor/sales
Food cost per customer/patient
An operating ratio. = total food cost/# of customers.
Meals per labor hour
An operating ration. = total number of meals served/total labor hours to produce meals
Trend analysis
A comparison of results over a period of time. Maybe expressed as %s or absolute numbers.
Common-size statements
A financial statement in which data is expressed in %s to make period-to-period comparison easier.
Break-even analysis
The point @ which an operation is making no revenue, but incurring no loss.
Contribution margin
The proportion of sales that can contribute to fixed costs and profit after variable costs have been covered. =1-(variable cost/sales)
Budgeting
A plan to control expenses and profit in relation to sales. All staff responsible for maintaing the budget should have input.
Operating budget
Sales budget is first set, accounting for profit objective and external influences. Next, expenditures must be budgeted. Then labor budget.
Capital budget
budget for expenditure on capital, capital improvements, replacement, expansion, etc.
Cash budget
Detail of cash receipts expected through out the year. Helps in planning for large payments. ex taxes, health insurance.
Pro forma statement
Statement the forecasts expected income & expenditures, includes projection of profits.
Payback period
The time it will take to recoup the money spent on an investment. ex. buying a new oven, or project
Time value of money
Money in hand today is worth more than money received to the future because it can be invested
Net present value
(NPV) Takes in to consideration the time value of money. Determines the current value of expected future cash inflow and outflow related to a capital expenditure.
Cost of capital
The minimum return a company expects on an investment. Expressed as a % and uses discounted cash flow factors.
Factor pricing method
Method for menu pricing, aka. mark-up method. The desired mark-up must first be determined, commonly 40%, & then divided into 100 to determine the pricing factor. Raw food cost x pricing factor = menu sale price.
Mark-up
Is the difference between a foods cost and its selling price.
Actual Cost
A menu pricing method; requires detailed record keeping, so time consuming, but does account for all costs in the menu price. Food cost must be established from standardized recipes and labor costs, then added to other variable costs + fixed costs + profit.
Pricing Psychology
Schemes to entice customers to buy: odd-cents, pricing by the ounce, two-teir food service, a la carte, table d’ note.
Financial management
Can be defined as the process of defining the financial goals, and program objectives for the nutrition and foodservice programs. & implementing activities to attain those goals through the effective use of resources.
Foodservice and nutrition programs should:
Plan through the budget process, apply more efficient cost control measures, increase productivity, and identify ways to increase resources.
Role of the Foodservice/Nutrition Director in managing finances
Management of financial resources. Maintain financial accountability. Involve administrators, board members, cafeteria managers, and staff to ID goals. Promote team approach. Assess, monitor, & evaluate program funds. Maintain on-going training.
Financial management information system
Provides a uniform & consistent financial reporting structure. Provides meaningful & timely financial management information. Supports federal reporting requirements. Adheres to GAAPs. Provides a basis for determining accountability.
Foodservice operating report
Built on four broad categories of operating data: workload units, labor hours, expenses & cost, and revenue.
Workload units
patient days, admissions, discharges
