CFD Financial Management & Budgeting 5

Question 1

A floral designer is deciding whether to purchase a delivery van outright or lease it. Which financial factor most favors leasing?

Accepted Answer

Preserving working capital for operations

Answer

Leasing preserves working capital by avoiding a large upfront purchase, keeping cash available for day-to-day business operations.

Question 2

What is 'shrinkage' in the context of a floral shop's financial management?

Accepted Answer

Loss of inventory due to spoilage, theft, or damage

Answer

Shrinkage refers to inventory loss from spoilage, theft, breakage, or administrative error, which directly reduces profitability.

Question 3

Which of the following best describes 'working capital' for a floral business?

Accepted Answer

Current assets minus current liabilities

Answer

Working capital = Current Assets − Current Liabilities, and it measures the short-term liquidity available to run daily operations.

Question 4

A florist notices her Valentine's Day revenue spikes 400% but January and March are very slow. Which financial strategy best manages this seasonal cash flow challenge?

Accepted Answer

Build a cash reserve during peak seasons to cover slow periods

Answer

Setting aside cash reserves during high-revenue periods allows the business to cover fixed costs during predictably slow months.

Question 5

Which cost does NOT change regardless of how many floral arrangements a shop produces in a month?

Accepted Answer

Monthly shop lease payment

Answer

The monthly lease payment is a fixed cost that remains constant regardless of production or sales volume.

(CFD) Certified Floral Designer Practice Test

(CFD) Certified Floral Designer Practice Test

CFD Financial Management & Budgeting 5