Question 1

Calculation of the current ratio would involve which two pieces of data?

Accepted Answer

The current ratio is a financial ratio that measures a company's ability to pay its short-term obligations. It is calculated by dividing current assets by current liabilities. Therefore, the two pieces of data needed for calculating the current ratio are current assets and current liabilities.

Question 2

Ratios that are used to examine an establishment's ability to meet its long-term financial obligations are termed _____________ ratios.

Accepted Answer

Solvency ratios measure an organization's ability to meet its long-term financial obligations (such as loans and debts) and whether it can maintain positive cash flow. Liquidity ratios measure an organization's ability to meet its short-term obligations (such as paying bills and debts due in the next year). Profitability ratios measure a company's ability to generate profit from its operations. Operating ratios measure an organization's efficiency in generating revenue from its operations.

Question 3

A pro forma income statement

Accepted Answer

A pro forma income statement is a financial statement that forecasts revenue, expenses, and profits for a specific period in the future. It is used for budgeting and planning purposes and helps businesses make informed decisions about their financial future.

Question 4

Jim had a beginning inventory of $5,500. During the month of April he purchased $4,000 of food and had an ending inventory of $3,800 at the end of the month. His sales for April were $8,750. What was his inventory turnover?

Accepted Answer

The answer of Jim had a beginning inventory of $5,500....

Question 5

Which of the following statements is true?

Accepted Answer

Fixed costs are not affected by changes in sales volume. These costs are the same regardless of the level of production or sales.

Question 6

Cash, marketable securities, and accounts receivable are all categorized as _____________ on a balance sheet.

Accepted Answer

Cash, marketable securities, and accounts receivable are all assets that can be converted to cash within a year, making them current assets.

Question 7

Accumulated depreciation is applied to which balance sheet category?

Accepted Answer

Accumulated depreciation is applied to fixed assets on the balance sheet. It represents the total amount of depreciation that has been charged to the assets over their useful lives. This reduces the value of fixed assets and is shown as a contra account to the fixed assets category on the balance sheet.

Question 8

One difference between a for-profit and a not-for-profit organization is

Accepted Answer

The answer of One difference between a for-profit and a...

Question 9

Sam Jones owns a local restaurant. He buys steaks from the restaurant to serve his family at home for dinner. Sam should record this sale in the restaurant's books because of the

Accepted Answer

The business entity principle requires that the finances of the owner and the business be kept separate. Since Sam Jones is the owner of the restaurant who is buying steaks for personal use, this transaction needs to be recorded in the restaurant's books to differentiate between personal and business finances.

Question 10

Sarah Michaels wants to evaluate her operation's efficiency by calculating the number of labor minutes per meal. Data from the previous week indicate that she served 7,500 meals. Her timecards indicated that employees worked a total of 625 hours for the week. What were labor minutes per meal for Sarah's operation?

Accepted Answer

To find the labor minutes per meal, first convert the total hours worked into minutes: 625 hours * 60 minutes/hour = 37,500 minutes. Then, divide the total labor minutes by the number of meals served: 37,500 minutes / 7,500 meals = 5 minutes per meal.

Question 11

The menu pricing method that uses desired food cost percentage in determining the menu sales price is termed the _____________ pricing method.

Accepted Answer

The factor pricing method, also known as the markup method, uses a desired food cost percentage to determine the menu sales price by dividing 100 by the desired food cost percentage to get a pricing factor, which is then multiplied by the cost of the food.

Question 12

A foodservice operation with a food cost of 40% has food costs that are equal to 40% of _____________.

Accepted Answer

Food costs that are equal to 40% means that for every dollar the operation generates in revenue, 40 cents are spent on food costs. Therefore, the answer is revenue.

Question 13

The _____________ says that a company who chooses to use the LIFO method for valuing their inventory must use that same method each year.

Accepted Answer

The consistency principle states that a company must use the same accounting methods and procedures from year to year. Therefore, if a company chooses to use the LIFO method for valuing their inventory, they must continue to use that method consistently each year.

Question 14

The financial statement that shows financial position at a point in time is the

Accepted Answer

The balance sheet is the financial statement that shows the financial position of a company at a specific point in time by reporting its assets, liabilities, and equity. The income statement (A) reports revenues and expenses for a period of time, the statement of change in financial position (B) shows the changes in the company's working capital and financing activities over a period of time, and P&L statement (C) is another name for the income statement.

Question 15

The breakeven point is where

Accepted Answer

The breakeven point is the level of production or sales at which total revenue equals total costs. At this point, there is no profit or loss. Option A is the definition of the accounting equation, but it is not directly related to the breakeven point. Option C is true for the breakeven point formula (Breakeven Point = Fixed Costs ÷ (Price - Variable Costs)) but is not the definition of the breakeven point. Option D is not correct as there can be profit or loss at any level of production or sales, except at the breakeven point where profit is zero.

Question 16

Typically the first step in the budget process is to compile the

Accepted Answer

The first step in the budget process is usually to create a sales budget, as this determines the amount of revenue that the company expects to generate during the budget period. The sales forecast is then used as a basis for creating the other budgets, such as the expenditure budget, capital expenditure budget, and pro forma income statement. However, the sales budget is the starting point for the entire process.

Question 17

The denominator used when calculating a common size income statement is

Accepted Answer

The denominator used when calculating a common size income statement is usually total sales or revenue. This allows for easy comparison of different aspects of the income statement, such as expenses or net income, as a percentage of total sales. Total assets or liabilities would not be appropriate denominators for this type of analysis.

Question 18

Perception of value

Accepted Answer

Perception of value refers to what customers believe a menu item is worth. This understanding helps managers determine the appropriate prices for menu items that align with the perceived value of customers.

Question 19

Assets and liabilities are a part of which financial statement?

Accepted Answer

Assets and liabilities are both components of the balance sheet, which is a financial statement that provides a snapshot of a company's financial position at a specific point in time. The income statement (A) and P&L statement (B) show a company's revenues and expenses over a period of time, while the opening budget (D) is a planning and forecasting tool rather than a financial statement.

Question 20

Having customers pay by the ounce for items purchased on sandwich or salad bars is an example of

Accepted Answer

Pricing by the ounce is a strategy that leverages pricing psychology, as it allows customers to feel they have control over the cost based on the quantity they choose, potentially leading to increased satisfaction and perceived value.

Quiz 13: Management of Financial Resources