CFD Financial Management & Budgeting 3 — Questions and Answers
Question 1: A florist purchases roses at $1.20 per stem and uses the standard industry markup of 3x to 4x. What should the retail price per stem be?
- $1.80–$2.40
- $2.40–$3.60
- $3.60–$4.80 (Correct answer)
- $4.80–$6.00
Correct answer: $3.60–$4.80
Applying a 3x–4x markup: $1.20 × 3 = $3.60 and $1.20 × 4 = $4.80, giving a range of $3.60–$4.80.
Question 2: What is the purpose of maintaining a petty cash fund in a floral shop?
- Paying supplier invoices
- Covering small, everyday cash expenses (Correct answer)
- Storing emergency loan funds
- Tracking credit card transactions
Correct answer: Covering small, everyday cash expenses
Petty cash funds are maintained to handle small, routine cash purchases without writing checks or processing card payments.
Question 3: A bridal client requests a budget breakdown before committing to a floral contract. Which item should be listed as a separate line item?
- Florist's profit margin
- Tax on wholesale purchases
- Delivery and setup fee (Correct answer)
- Designer's hourly training cost
Correct answer: Delivery and setup fee
Delivery and setup fees are a direct client-facing cost that should be itemized separately in wedding floral proposals.
Question 4: Which term describes the minimum amount a business must earn to cover all its costs with zero profit or loss?
- Gross margin threshold
- Break-even point (Correct answer)
- Net revenue floor
- Operating leverage
Correct answer: Break-even point
The break-even point is where total revenues exactly equal total costs, resulting in neither profit nor loss.
Question 5: A floral designer is creating a budget for a corporate event. Which expense is a variable cost?
- Monthly shop rent
- Annual insurance premium
- Flowers and greenery per arrangement (Correct answer)
- Salaried employee wages
Correct answer: Flowers and greenery per arrangement
Flowers and greenery costs vary directly with the number of arrangements produced, making them variable costs.
Question 6: What does a negative cash flow statement indicate for a floral business?
- The business is profitable
- More cash is going out than coming in (Correct answer)
- Accounts receivable are increasing
- Inventory levels are optimal
Correct answer: More cash is going out than coming in
Negative cash flow means the business is spending more cash than it is receiving, which can threaten operations even if the business shows accounting profit.
Question 7: A florist offers a 10% early-payment discount to clients who pay invoices within 10 days. This is an example of what type of incentive?
- Volume discount
- Cash discount (Correct answer)
- Trade discount
- Seasonal discount
Correct answer: Cash discount
A cash discount (also called a prompt payment discount) is offered to encourage customers to pay invoices quickly.
CFD Financial Management & Budgeting 3
A florist purchases roses at $1.20 per stem and uses the standard industry markup of 3x to 4x.
What should the retail price per stem be?