CRM Financial Management 3 — Questions and Answers
Question 1: A restaurant generates $800,000 in annual revenue with $640,000 in total expenses. What is the net profit margin?
- 15%
- 18%
- 20% (Correct answer)
- 25%
Correct answer: 20%
Net profit = $800,000 − $640,000 = $160,000; margin = $160,000 ÷ $800,000 = 20%.
Question 2: Which costing method assigns overhead costs to menu items based on the resources each item actually consumes?
- Job order costing
- Activity-based costing (Correct answer)
- Standard costing
- Process costing
Correct answer: Activity-based costing
Activity-based costing (ABC) allocates overhead based on the actual activities and resources each product consumes.
Question 3: A restaurant's current assets are $45,000 and current liabilities are $30,000. What is the current ratio?
- 0.67
- 1.33
- 1.50 (Correct answer)
- 2.00
Correct answer: 1.50
Current ratio = $45,000 ÷ $30,000 = 1.50, indicating the restaurant can cover short-term obligations.
Question 4: What is the purpose of a rolling budget in restaurant financial management?
- To freeze spending for the fiscal year
- To continuously update forecasts by adding future periods as past periods close (Correct answer)
- To allocate costs equally across all months
- To separate capital from operating expenses
Correct answer: To continuously update forecasts by adding future periods as past periods close
A rolling budget is continuously updated, dropping the most recent period and adding a new future period to maintain a consistent planning horizon.
Question 5: Which of the following best describes 'depreciation' in restaurant accounting?
- Decline in menu item popularity
- Reduction in asset value over time allocated as an expense (Correct answer)
- Decrease in customer traffic
- Loss of inventory due to spoilage
Correct answer: Reduction in asset value over time allocated as an expense
Depreciation spreads the cost of long-term assets like equipment and furniture over their useful lives as a non-cash expense.
Question 6: A restaurant's table turns 4 times per night with an average check of $35 and 20 tables. What is nightly revenue?
- $2,100
- $2,400
- $2,800 (Correct answer)
- $3,200
Correct answer: $2,800
Nightly revenue = 4 turns × $35 average check × 20 tables = $2,800.
Question 7: What is 'working capital' in restaurant operations?
- Total equity minus long-term liabilities
- Current assets minus current liabilities (Correct answer)
- Annual revenue minus annual expenses
- Fixed assets available for operations
Correct answer: Current assets minus current liabilities
Working capital = current assets − current liabilities, measuring a restaurant's short-term liquidity and operational efficiency.
CRM Financial Management 3
A restaurant generates $800,000 in annual revenue with $640,000 in total expenses.
What is the net profit margin?