CVE Venue Financial Management 3 — Questions and Answers
Question 1: A venue's accounts receivable days outstanding increases from 25 to 45 days. This change most likely indicates:
- Faster client payments
- Improved cash flow
- Slower collection of invoices (Correct answer)
- Increased event bookings
Correct answer: Slower collection of invoices
A higher days-outstanding figure means the venue is taking longer to collect payments, which can strain cash flow.
Question 2: What is the purpose of a capital expenditure (CapEx) budget for a venue?
- To track daily operating expenses
- To plan major asset purchases and long-term investments (Correct answer)
- To monitor employee benefit costs
- To forecast monthly utility bills
Correct answer: To plan major asset purchases and long-term investments
A CapEx budget plans for significant purchases like equipment, renovations, or technology that provide long-term value beyond a single accounting period.
Question 3: Which financial ratio measures a venue's ability to pay short-term obligations with its most liquid assets?
- Debt-to-equity ratio
- Current ratio
- Quick ratio (Correct answer)
- Return on assets
Correct answer: Quick ratio
The quick ratio (cash + receivables ÷ current liabilities) measures liquidity using only the most liquid assets, excluding inventory.
Question 4: A venue generates $1.2M in annual revenue and has $180,000 in net profit. What is the net profit margin?
- 6.7%
- 12%
- 15% (Correct answer)
- 18%
Correct answer: 15%
Net profit margin = Net profit ÷ Revenue = $180,000 ÷ $1,200,000 = 15%.
Question 5: In venue contract negotiations, a 'minimum guarantee' clause primarily protects:
- The venue from event cancellations (Correct answer)
- The client from overbooking
- The catering vendor from low attendance
- The insurance carrier
Correct answer: The venue from event cancellations
A minimum guarantee ensures the venue receives a baseline revenue payment regardless of actual event attendance or consumption.
Question 6: Which internal control best prevents duplicate payments to vendors in a venue's accounts payable process?
- Weekly bank reconciliations
- Three-way matching of purchase order, receiving report, and invoice (Correct answer)
- Monthly budget variance reviews
- Annual external audits
Correct answer: Three-way matching of purchase order, receiving report, and invoice
Three-way matching verifies that the purchase order, delivery receipt, and vendor invoice all agree before payment is authorized, preventing duplicates and errors.
Question 7: A venue manager reviews an unfavorable budget variance for utilities. The FIRST step in addressing this variance is to:
- Immediately cut staffing costs to offset it
- Investigate the root cause of the overage (Correct answer)
- Revise the annual budget upward
- Defer all capital projects
Correct answer: Investigate the root cause of the overage
Before taking corrective action, a manager must identify whether the variance stems from higher-than-expected usage, rate increases, or a billing error.
