Financial Management Flashcards

A restaurant's prime cost ratio is 68%. If total sales are $50,000, what is the prime cost?

Answer: $34,000

Prime cost = 68% × $50,000 = $34,000.

Which financial document shows a restaurant's revenue, costs, and profit over a specific time period?

Answer: Profit and loss statement

The profit and loss (P&L) statement summarizes revenues and expenses over a defined period.

What does a restaurant's 'contribution margin' represent?

Answer: Revenue minus variable costs

Contribution margin equals revenue minus variable costs, showing how much covers fixed costs and profit.

A restaurant has fixed costs of $20,000/month and a contribution margin ratio of 40%. What is the break-even sales volume?

Answer: $50,000

Break-even = Fixed costs ÷ Contribution margin ratio = $20,000 ÷ 0.40 = $50,000.

Which metric measures how efficiently a restaurant converts revenue into actual cash?

Answer: Operating cash flow

Operating cash flow measures actual cash generated from restaurant operations, separate from accounting profit.

If a menu item costs $4.50 to produce and is sold for $16.00, what is its food cost percentage?

Answer: 28.1%

Food cost % = ($4.50 ÷ $16.00) × 100 = 28.1%.

What is 'accounts payable' in a restaurant context?

Answer: Money the restaurant owes to suppliers and vendors

Accounts payable represents money the restaurant owes to suppliers, vendors, and creditors for goods or services received.