Beauty Business Beauty Business Financial Management and Pricing Questions and Answers 2 — Questions and Answers
Question 1: What is the term for the total revenue remaining after subtracting the cost of goods sold in a beauty salon?
- Gross profit (Correct answer)
- Net income
- Operating expense
- Retained earnings
Correct answer: Gross profit
Gross profit is calculated by subtracting cost of goods sold from total revenue.
Question 2: A salon owner wants to ensure each service covers its costs and contributes to overhead — which pricing method sets prices based on total cost plus a desired profit margin?
- Competitive pricing
- Cost-plus pricing (Correct answer)
- Value-based pricing
- Penetration pricing
Correct answer: Cost-plus pricing
Cost-plus pricing adds a markup percentage to the total cost of delivering a service.
Question 3: Which financial document provides a snapshot of a beauty business's assets, liabilities, and equity at a specific point in time?
- Income statement
- Cash flow statement
- Balance sheet (Correct answer)
- Budget forecast
Correct answer: Balance sheet
A balance sheet lists assets, liabilities, and owner's equity as of a specific date.
Question 4: When a beauty business offers a lower introductory price for a new treatment to attract clients quickly, this is known as what pricing strategy?
- Skimming pricing
- Penetration pricing (Correct answer)
- Bundle pricing
- Premium pricing
Correct answer: Penetration pricing
Penetration pricing uses low initial prices to rapidly build a client base for a new service.
Question 5: What key financial metric measures how efficiently a salon uses its inventory by calculating how many times stock is sold and replaced over a period?
- Current ratio
- Inventory turnover ratio (Correct answer)
- Debt-to-equity ratio
- Return on investment
Correct answer: Inventory turnover ratio
Inventory turnover ratio shows how many times inventory is sold and restocked during a given period.
Question 6: Which type of expense in a beauty salon remains the same regardless of the number of clients served, such as monthly rent?
- Variable expense
- Semi-variable expense
- Fixed expense (Correct answer)
- Direct expense
Correct answer: Fixed expense
Fixed expenses like rent stay constant regardless of business volume.
Beauty Business Beauty Business Financial Management and Pricing Questions and Answers 2
What is the term for the total revenue remaining after subtracting the cost of goods sold in a beauty salon?