Beauty Business Salon Financial Management 2 — Questions and Answers
Question 1: A salon owner wants to know the minimum revenue needed to cover all costs without profit or loss. What is this figure called?
- Break-even point (Correct answer)
- Gross margin
- Net profit
- Markup rate
Correct answer: Break-even point
The break-even point is the sales level where total revenue exactly equals total costs.
Question 2: Which cost stays the same each month regardless of how many clients the salon serves?
- Retail product cost of goods sold
- Salon rent (Correct answer)
- Hourly stylist wages tied to bookings
- Color and chemical supplies
Correct answer: Salon rent
Rent is a fixed cost that does not change with client volume.
Question 3: A service priced at $80 uses $12 in product. What is the service cost of goods percentage?
- 8%
- 12%
- 15% (Correct answer)
- 20%
Correct answer: 15%
$12 divided by $80 equals 15%.
Question 4: What does 'net profit' represent on a salon income statement?
- Total sales before any deductions
- Revenue minus cost of goods only
- Revenue remaining after all expenses and taxes (Correct answer)
- Cash in the register at day's end
Correct answer: Revenue remaining after all expenses and taxes
Net profit is what remains after every expense, including taxes, is subtracted from revenue.
Question 5: A commonly recommended target keeps total payroll (including owner) at what share of salon revenue?
- Around 15%
- Around 35-50% (Correct answer)
- Around 70%
- Around 90%
Correct answer: Around 35-50%
Keeping payroll near 35-50% of revenue is a widely used benchmark for salon profitability.
Question 6: Why should a salon track retail sales separately from service sales?
- Retail is exempt from sales tax
- They have different profit margins and inventory needs (Correct answer)
- Retail cannot be sold by stylists
- Service revenue is not taxable
Correct answer: They have different profit margins and inventory needs
Retail and services carry different margins and require distinct tracking for accurate reporting.
Question 7: What is 'cash flow' in a salon business context?
- The total profit for the year
- The movement of money into and out of the business (Correct answer)
- The value of salon equipment
- The number of clients served daily
Correct answer: The movement of money into and out of the business
Cash flow measures the money coming in and going out over a given period.
Beauty Business Salon Financial Management 2
A salon owner wants to know the minimum revenue needed to cover all costs without profit or loss.
What is this figure called?