CPS Business Management 3 — Questions and Answers
Question 1: What does 'accounts receivable' represent in a grooming salon's financial records?
- Money owed to suppliers for products
- Money clients still owe the salon for completed services (Correct answer)
- The salon's monthly payroll obligations
- Cash held in the register at end of day
Correct answer: Money clients still owe the salon for completed services
Accounts receivable refers to money owed to the business by clients who have received services but have not yet paid.
Question 2: Which business structure offers the owner personal liability protection while still being relatively simple to set up?
- Sole proprietorship
- General partnership
- Limited liability company (LLC) (Correct answer)
- S-Corporation
Correct answer: Limited liability company (LLC)
An LLC separates the owner's personal assets from business liabilities, providing legal protection while requiring less formality than a corporation.
Question 3: A grooming salon charges $65 for a full groom and spends $20 in variable costs per appointment. What is the contribution margin per groom?
- $65
- $20
- $45 (Correct answer)
- $85
Correct answer: $45
Contribution margin equals revenue minus variable costs; $65 − $20 = $45, which goes toward covering fixed costs and profit.
Question 4: What is a key benefit of building a loyalty rewards program for grooming clients?
- It eliminates the need for social media marketing
- It increases client retention and repeat booking frequency (Correct answer)
- It reduces the cost of grooming supplies
- It allows the salon to charge higher prices immediately
Correct answer: It increases client retention and repeat booking frequency
Loyalty programs incentivize clients to return regularly and book more often, increasing customer lifetime value and reducing churn.
Question 5: Which document should a grooming salon require before performing services on a new client's pet?
- A breed registration certificate
- A signed service agreement or intake form with liability waiver (Correct answer)
- A veterinary referral letter
- A photo ID from the pet owner
Correct answer: A signed service agreement or intake form with liability waiver
A signed intake form and liability waiver documents the owner's consent, pet's health history, and protects the business from certain legal claims.
Question 6: How does a grooming salon benefit from maintaining a detailed client database?
- It replaces the need for scheduling software
- It allows targeted marketing and personalized service reminders (Correct answer)
- It satisfies state licensing requirements
- It eliminates supply ordering errors
Correct answer: It allows targeted marketing and personalized service reminders
A client database enables the salon to send appointment reminders, personalized promotions, and service history notes, improving retention and communication.
Question 7: What is the purpose of a profit and loss (P&L) statement for a grooming business?
- To list all current client appointments
- To summarize revenues, costs, and expenses over a period to show net profit or loss (Correct answer)
- To document employee grooming certifications
- To calculate the salon's market value
Correct answer: To summarize revenues, costs, and expenses over a period to show net profit or loss
A P&L statement provides a financial summary showing whether the business earned more than it spent over a given time period.
CPS Business Management 3
What does 'accounts receivable' represent in a grooming salon's financial records?