Lesson 4: Financial Management

Question 1

1. The document used to entice sponsorships for your event and contains information regarding the overview of the event, the potential return on investment, terms and conditions, and demographic information would be called the:
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   A. Stakeholder management plan
   B. Financial Sponsor Plan
   C. Sponsorship Prospectus
   D. Donation plan

Answer 1

C. Sponsorship Prospectus

Question 2

2. Selling a sponsorship to an entity that will underwrite the majority of the event and will have its brand name associated with the event is called a:
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   A. Title Sponsor
   B. In-Kind Sponsor
   C. Managing Partner Sponsor
   D. Donation Sponsor

Answer 2

A. Title Sponsor

Question 3

3. Budgeting based on having no prior history and the budget is created using estimates of revenue and expenses is called:
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   A. Indirect budget
   B. Zero-based budget
   C. Incremental budget
   D. Zero-line budget

Answer 3

B. Zero-based budget

Question 4

4. These expenses are used to cover staff salaries, overhead, and any organizational expenses not directly related to the event:
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   A. Variable Costs
   B. Fixed Costs
   C. Incremental Costs
   D. Indirect Costs

Answer 4

D. Indirect Costs

Question 5

5. This tool helps monitor cash flow and illustrates the budget lifecycle from inception to final billing. It’s called:
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   A. Billing Timetable
   B. Chart of Accounts
   C. Balance Sheet
   D. Income Statement

Answer 5

A. Billing Timetable

Question 6

6. Which one of these represents the Contribution Margin?
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   A. Attendees- Registration Fee
   B. Total Fixed Costs + Total Variable Costs
   C. Registration Fee – Variable Costs
   D. Total Fixed Costs – Breakeven Units

Answer 6

C. Registration Fee – Variable Costs

Question 7

7. If you wanted to make sure you had a guaranteed currency rate of exchange for your future meeting you would:
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   A. Have the rate float within certain limits
   B. Buy Forward the currency rate of exchange
   C. Use a guaranteed VAT to fix the currency
   D. Ask to have your exchange rate tied to the Euro

Answer 7

B. Buy Forward the currency rate of exchange

Question 8

8. Which type of accounting system counts income and expenses as they are actually received and paid?
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   A. Cash Accounting
   B. Income Accounting
   C. Accrual Accounting
   D. Variable Accounting

Answer 8

A. Cash Accounting

Question 9

9. In General who is able to reclaim any VAT paid?
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   A. Every attendee who is not from the country where the VAT is collected
   B. The meeting organizer
   C. The company hosting the meeting
   D. Any individual in attendance

Answer 9

C. The company hosting the meeting

Question 10

10. The document provided to the hotel which specifies what can be billed to the master account, limits of financial liability and who is authorized to charge to the master account is called the:
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    A. Billing timetable
    B. Direct Bill application
    C. Balance sheet
    D. Master Account Authorization Form

Answer 10

D. Master Account Authorization Form

Question 11

11. Net Income is:
    A. Expenses + Income
    B. Gross Profit- Loss
    C. Revenue – Expenses
    D. Gross Profit + Revenue

Answer 11

C. Revenue – Expenses

Question 12

12. A Variance in the budget is defined as:
    A. An item in the budget not expected
    B. The difference between the budgeted line item and the actual line item
    C. Charges to the budget that cannot be categorized
    D. The difference between net income and net expenses

Answer 12

B. The difference between the budgeted line item and the actual line item

Question 13

13. When calculating your registration fee, which of the following costs would be considered “variable costs”?
    A. Meals, T-shirts, guest rooms
    B. Salaries, overhead, insurance
    C. Guest Speaker fees, meeting room rental, transportation costs
    D. Meeting room rental, guest rooms, food and beverage

Answer 13

A. Meals, T-shirts, guest rooms

Question 14

Cash Accounting

Answer 14

Counts income and expenses as they are received and paid

Question 15

Accrual Accounting

Answer 15

Counts expenses and income when they are earned or incurred

Question 16

Chart of Accounts

Answer 16

List of line items that make up the revenue and expense categories

Question 17

Paid Out

Answer 17

the advance of cash a hotel may give you then charge to your master account- to use as cash tips for example

Question 18

Registration Fee Formula

Answer 18

Registration Fee = Total Fixed Costs + Total Variable Costs
———————————————————
# Attendees

Question 19

Total Variable Costs

Answer 19

Are the Variable costs X number of ppl

Question 20

Breakeven Units Formula

Answer 20

Breakeven Units = Total Fixed Costs
—————————————————-
Registration Fee- Variable Costs

Question 21

Contribution Margin Formula

Answer 21

Registration Fee- Variable Costs

Question 22

ROI Formula

Answer 22

ROI = Meeting Benefits - Meeting Costs
———————————————– x 100
Meeting Costs

Question 23

Net Income Formula

Answer 23

Net Income = Revenue – Expenses

Question 24

Percent of Variance Formula

Answer 24

Percent of Variance = Actual Line Item – Budget Line Item
—————————————————-
Budget Line Item

Question 25

fixed cost

Answer 25

total amount of profit

Question 26

Registration Fee is $25; Your costs are $1000 for meeting room rental, $100 for AV, and $500 for a speaker (Total Fixed costs $1600)
Food and beverage is $10 per person and $5 for a T-shirt ( variable costs $15 per person)

1. How many attendees do you need to break even?

Answer 26

1. $1600 (Fixed costs)
   ——————————————– = 160 attendees to break even
   $25-$15 (Registration-Variable Costs)

Question 27

Registration Fee is $25; Your costs are $1000 for meeting room rental, $100 for AV, and $500 for a speaker (Total Fixed costs $1600)
Food and beverage is $10 per person and $5 for a T-shirt ( variable costs $15 per person)

2. How many attendees do you need to turn a profit of $1500?

Answer 27

2. $1600 (FC) + $1500 (profit) = $3100
   ————————————– ———- = 310 attendees
   $25 - $15 (Reg – VC) $10

Question 28

Registration Fee is $25; Your costs are $1000 for meeting room rental, $100 for AV, and $500 for a speaker (Total Fixed costs $1600)
Food and beverage is $10 per person and $5 for a T-shirt ( variable costs $15 per person)

3. The meeting room only holds 200 people. If you still want a profit of $1500, what should you raise the registration fee to?

Answer 28

3. $1600 + $1500 + 200($15) = $3100 + $3000 = $6100
   ———————————— ——————– ——— = $30.50
   200 attendees 200 attendees 200

$30.50 Registration Fee

In this example, you need to add up all of your costs, fixed costs, variable costs, and profit, and divide by the number of attendees. Since the maximum attendees is 200 then your maximum variable costs will be the variable costs per person multiplied by the number of people the room can hold.

Question 29

4. Your meeting budget outlines a registration fee of $595 per participant and you are planning for 200 attendees. Variable costs total $375 per person. Fixed costs total $45,000. What is the contribution margin?
   a. 220b. 225c. 375d. 395

Answer 29

4. $595 (Registration Fee)- $375 (Variable Costs)= $220
   The fixed costs value and the number of people are extra information that is not needed to answer the question.

Question 30

5. Your meeting has a registration fee of $200, fixed costs of $30,000, and a variable cost of $55 per person. How many attendees do you need to break even?

a. 118
b. 150
c. 207
d. 546

Answer 30

5. $30,000 (Fixed costs) = $30,000
   ——————————- ———— = $206.8
   $200 (Reg Fee)- $55(Var Cost) $145

Question 31

6. You need to determine the registration fee for an upcoming conference. Your management wants to make a profit of $5000 on the event. You have $3500 room rental fee, $2500 on- site staff cost, $200 website creation, $100 per person food and beverage, $25 t-shirt cost per person, & $800 printing fee. You expect 400 attendees. Your registration fee should be?a. $160
   b. $61
   c. $185
   d. $155

Answer 31

6. Total Fixed costs:
   $5000+ $3500+$2500+$200+$800 = $12,000
   Variable Costs per Person: $100 + $25 = $125

RF = $12,000 + ($125 pp x400ppl)
—————————————— = $155
400 ppl

Question 32

Sponsors come from a variety of sources

Answer 32

1. Previous sponsors
2. Current suppliers or exhibitors
3. Your stakeholders
4. Research
5. Referrals

Question 33

Sponsor Prospectus

Answer 33

A sponsor benefit package that contains information to assist the prospective sponsor in making a decision

Question 34

Title or Main Sponsor

Answer 34

Sponsor will underwrite the majority of the event and its name will be associated with the name of the event

Question 35

Tiered Model of Sponsorship

Answer 35

Example: Bronze-Silver-Gold (levels)
Sponsorship of specific areas of the event, such as breakfast sponsor or sustainability sponsor

Question 36

Credit Model of Sponsorship

Answer 36

A situation where a larger, established entity (the “Sponsor”) provides credit support or guarantees to a smaller business or project, essentially acting as a guarantor to enhance the smaller entity’s ability to secure loans or financing, often leveraging the sponsor’s strong credit rating to gain better terms for the sponsored entity

Question 37

In-Kind Sponsors

Answer 37

Sponsor provides goods or services at no cost to the event

Question 38

When developing the Registration Process

Answer 38

1. Create a registration form
2. Identify all of the information you need from the attendees to track them and ensure their needs are met at the event
3. Collect specific data for different types of registrants, such as exhibitor, a speaker, or an attendee
4. Scheduling information that alerts registrants to conflicts with their selections
5. The system can be edited after the site is live to close full options or to make other needed changes
6. integrated with secure payment transactions
7. one-stop shopping can be managed by combining registration, housing, and travel in one system
8. Have an automatic confirmation generated and communicate with registered attendees
   NOTE: (ASP) Application Service Providers- System to enable the event by sending a message to a specific attendee in a session
9. integrated with the event website and mobile applications so updates automatically feed into different components

Question 39

What is a CRM

Answer 39

Customer relationship management

Question 40

Exhibit Sales Process

Answer 40

Can be set up in the form of booth sales, sponsorships, advertising, and registration fees, educational opportunities (Allowing attendees to learn about products, services, and technology that are relevant to their field

Question 41

Setting the Price on Exhibit Booths

Answer 41

• Prices of past and comparable
  -types of available booths (Standard, Corner, Island)
  -how to price (by size of unit, area, etc)
  -market response
  -event cost
  -what do you plan to include in the booth

Question 42

Exhibitor Prospectus

Answer 42

Outline that includes full benefits and information about the show for exhibitors

Question 43

Developing the budget involves the following steps

Answer 43

1. identify the categories of revenues and expenses for your event
2. estimate the quantities for each budget item
3. research costs for each budget item
4. set prices to meet financial goals

Question 44

Fixed Cost

Answer 44

Regardless of the number of attendees of the event, the number will be the same. Example- Meeting Room rental, Marketing, signage

Question 45

Variable Cost

Answer 45

The cost is according to the number of attendees. Example- food & beverage, printed material

Question 46

Indirect costs

Answer 46

Expenses that are not related to the event. For example staff salaries and wages, equipment repair

Question 47

incremental budgeting

Answer 47

is a budgeting method that involves making slight adjustments to an existing budget to create a new one. It’s considered one of the most conservative budgeting methods

Question 48

Zero Based budgeting

Answer 48

is a budgeting method that involves starting from zero and justifying all expenses for each new period, instead of starting with the previous budget and adjusting it

Question 49

Avoid seven common mistakes in budget planning

Answer 49

1. allow contingencies for the unexpected
2. including tax and service charges
3. include labor costs
4. communicate clear policies to speakers and staff
5. review the master account daily
6. rely on history for meal guarantees
7. know the value of your business

Question 50

Buying Forward

Answer 50

A contract to exchange a certain amount of money on a specified date at a specified exchange rate

Question 51

Taxes

Answer 51

USA: local sales tax
Europe: value added tax (VAT)

Question 52

Two Accounting methods that are most widely used in the events industry and elsewhere

Answer 52

1. Cash Accounting (income and expenses that are actually received and paid)
2. Accrual Accounting (Income and expenses that are earned or incurred)

Question 53

Three accounting tools that can help an event professional with budgeting and forecasting

Answer 53

1. income statements: a statement of revenue and expenses over a period of time
2. balance sheets: a statement that indicates overall financial status by subtracting expenses from income
3. cash flow statements: Distinct from income statement and balance sheet because it does not include the amount of future incoming and outgoing cash that has been recorded on credit

Question 54

Chart of accounts

Answer 54

Detailed list of individual line item that makes up the revenue and expense categories in a budget