CFSP Financial Management 5

Question 1

What does 'working capital' measure in a foodservice business?

Accepted Answer

Current assets minus current liabilities, reflecting short-term financial health

Answer

Working capital (current assets minus current liabilities) indicates whether a business has enough short-term assets to cover its immediate obligations.

Question 2

In foodservice menu engineering, what characterizes a 'plow horse' menu item?

Accepted Answer

High popularity but low profit margin

Answer

Plow horses are menu bestsellers that generate high sales volume but offer below-average contribution margins, making them candidates for price increases or cost reduction.

Question 3

What is the 'quick ratio' and what does it indicate about a restaurant's liquidity?

Accepted Answer

(Current assets minus inventory) divided by current liabilities; measures ability to meet short-term obligations without selling inventory

Answer

The quick ratio excludes inventory from current assets because inventory may not be quickly convertible to cash, providing a more conservative view of short-term liquidity.

Question 4

What is 'cost of goods sold' (COGS) in a foodservice context?

Accepted Answer

The direct cost of food and beverage products used to generate sales revenue

Answer

COGS in foodservice represents the actual cost of food and beverage ingredients consumed in producing the menu items sold during a period.

Question 5

When conducting a cost-benefit analysis for a new POS system, which factor represents an 'intangible benefit'?

Accepted Answer

Improved customer satisfaction from faster order processing

Answer

Intangible benefits like improved customer satisfaction are real but difficult to quantify in dollar terms, unlike concrete savings in labor or supply costs.

(CFSP) Certified Foodservice Professional Practice Test

(CFSP) Certified Foodservice Professional Practice Test

CFSP Financial Management 5