Financial Management Flashcards

Which pricing strategy sets menu prices based on competitor pricing rather than internal costs?

Answer: Competitive pricing

Competitive pricing sets prices in relation to what competitors charge, regardless of the restaurant's own cost structure.

What is 'shrinkage' in the context of restaurant inventory management?

Answer: Inventory loss due to theft, spoilage, or waste

Shrinkage refers to inventory reductions from employee theft, customer theft, spoilage, and administrative errors.

A restaurant owner wants to evaluate the financial health before a potential sale. Which document provides a snapshot of assets, liabilities, and equity at a specific date?

Answer: Balance sheet

The balance sheet shows assets, liabilities, and owner's equity at a single point in time, reflecting the restaurant's financial position.

If a restaurant has a debt-to-equity ratio of 2.5, what does this indicate?

Answer: The restaurant owes $2.50 for every $1 of owner equity

A debt-to-equity ratio of 2.5 means the restaurant has $2.50 in liabilities for every $1 of equity, indicating higher financial leverage.

Which budgeting approach starts from zero each period and requires justification for every expense line?

Answer: Zero-based budgeting

Zero-based budgeting requires managers to justify every expense from scratch each period rather than adjusting prior-year figures.

A restaurant's beverage cost is $18,000 and beverage sales are $75,000. What is the beverage cost percentage?

Answer: 24%

Beverage cost % = ($18,000 ÷ $75,000) × 100 = 24%.

What is the main advantage of using a point-of-sale (POS) system for financial management in a restaurant?

Answer: It provides real-time sales data and integrates with inventory tracking

A POS system delivers real-time sales reporting, integrates with inventory systems, and provides data for labor scheduling and financial analysis.