Chapter 3: Business Basics

Question 1

The central company document that the owner and employees use to make decisions is a

Answer 1

Business plan

Question 2

The three basic elements of a personal financial statement are

Answer 2

Assets, liabilities, and net worth

Question 3

On a personal financial statement, all the money owed is called

Answer 3

Liabilities

Question 4

Assets minus liabilities equals

Answer 4

Net worth

Question 5

A business owned by one person who is in complete control is called a

Answer 5

Sole proprietorship

Question 6

A business owned by two or more persons is a

Answer 6

Partnership

Question 7

Which type of business is owned by shareholders

Answer 7

Corporation

Question 8

A financial advisor who sets up a basic bookkeeping system and reviews rental agreements is a(n)

Answer 8

Accountant

Question 9

An advisor on borrowing money, signing rental agreements, and assuming tax responsibilities is a(n)

Answer 9

Lawyer

Question 10

Which of the following experts acts as a link between the manufacturer and the skin care center

Answer 10

Distributor

Question 11

The most important factor in opening a skin care business is

Answer 11

Location

Question 12

Which of the following is the first step in gauging the market need?
A) obtaining a 10-year forecast of the economic future
B) finding out what services other skin care centers offer
C) finding out what type of potential clientele are in the area
D) determining how many skin care centers are in the area

Answer 12

D) determining how many skin care centers are in the area

Question 13

Which of the following measurements per Esthetician allows for an efficient working space? 
A) 50 to 60 square feet
B) 70 to 80 square feet
C) 90 to 100 square feet
D) 120 to 150 square feet

Answer 13

D) 120 to 150 square feet

Question 14

The reservoir of cash that is needed to stay ahead of creditors is called

Answer 14

Operating capital

Question 15

A reserve of cash that you can draw upon to meet operating expenses if you have a slow month or two is called

Answer 15

Line of credit

Question 16

Which type of rent allows owners to predict monthly expenses carefully

Answer 16

Fixed rent

Question 17

A set dollar amount paid per month plus a percentage of the total monthly income is called

Answer 17

Variable rent

Question 18

Insurance is a type of

Answer 18

Risk management

Question 19

Which type of insurance covers the cost of a lawsuit or settlement resulting rom damage inflicted on a client during an service?

Answer 19

Malpractice

Question 20

An insurance policy that covers the actual skin care center equipment and physical location is known as

Answer 20

Property

Question 21

Which of the following insurance policies is required by law

Answer 21

Worker’s compensation

Question 22

All payments received from a client for services performed and home care products purchased are referred to as

Answer 22

Income

Question 23

All cost incurred in the day-to-day running of the skin care center are called the

Answer 23

Operating expenses

Question 24

Utilities, supplies, cost of promotions, postage, and taxes are types of

Answer 24

Variable costs

Question 25

If the skin care center’s income is greater than the operating expenses, the skin care center is operating at a(n)

Answer 25

Profit

Question 26

An estimate of what will be earned in revenues and what will be paid out in expenses is called a

Answer 26

Projection

Question 27

A withholding tax that is a planned savings / retirement fund for every worker in the US is called

Answer 27

Social Security Tax

Question 28

Which of the following items does a skin care center owner apply for enforce collecting tax on products or services sold?

Answer 28

State Sales Tax Permit

Question 29

A skin care center should keep all records of daily sales and services for at least

Answer 29

6 months

Question 30

What type of compensation is based on a percentage of the income an individual Esthetician generates?

Answer 30

Commission