CMP Financial & Strategic Management 2 — Questions and Answers
Question 1: Which financial metric measures the total revenue generated by an event minus all direct costs associated with that event?
- Gross profit (Correct answer)
- Net profit margin
- Return on investment
- Break-even point
Correct answer: Gross profit
Gross profit is calculated as total revenue minus direct (variable) costs, before deducting overhead or fixed expenses.
Question 2: An event planner is preparing a budget and must account for costs that remain constant regardless of attendance. These are known as:
- Variable costs
- Fixed costs (Correct answer)
- Sunk costs
- Opportunity costs
Correct answer: Fixed costs
Fixed costs remain unchanged regardless of event attendance volume, such as venue rental fees or speaker contracts.
Question 3: When using zero-based budgeting for a meeting, the planner must:
- Increase last year's budget by a fixed percentage
- Justify every expense from scratch each budget cycle (Correct answer)
- Use only historical spending data as the baseline
- Allocate funds based on department seniority
Correct answer: Justify every expense from scratch each budget cycle
Zero-based budgeting requires justifying all expenditures from zero each cycle rather than using prior budgets as a baseline.
Question 4: A meeting professional is conducting a post-event financial reconciliation. Which document compares actual expenditures to the approved budget?
- Income statement
- Variance report (Correct answer)
- Cash flow forecast
- Balance sheet
Correct answer: Variance report
A variance report highlights differences between budgeted and actual figures, enabling planners to identify over- or under-spending.
Question 5: Which pricing strategy sets registration fees based on what competitors charge for similar events?
- Cost-plus pricing
- Value-based pricing
- Competitive pricing (Correct answer)
- Penetration pricing
Correct answer: Competitive pricing
Competitive pricing establishes fees by benchmarking against similar events in the market rather than solely on internal costs.
Question 6: In event financial management, 'attrition' most commonly refers to:
- The rate at which sponsors withdraw from an event
- The penalty incurred when contracted room blocks are not filled (Correct answer)
- The depreciation of event equipment over time
- The decline in repeat attendee participation
Correct answer: The penalty incurred when contracted room blocks are not filled
Attrition clauses in hotel contracts require the client to pay penalties if a guaranteed minimum number of room nights is not consumed.
Question 7: Which financial document provides a snapshot of an organization's assets, liabilities, and equity at a specific point in time?
- Income statement
- Cash flow statement
- Balance sheet (Correct answer)
- Budget variance report
Correct answer: Balance sheet
A balance sheet presents assets, liabilities, and equity as of a specific date, offering a financial position snapshot.
CMP Financial & Strategic Management 2
Which financial metric measures the total revenue generated by an event minus all direct costs associated with that event?