Facility Management 1
What information would be most useful to the planning team interested in measuring the facility's past or current success?
quantitative data on the annual revenue of past/present performances
What is the definition of the "cost of goods sold?"
represents the value (at cost) of all merchandise sold to customers, stolen, lost, damaged, or destroyed during a period of time
What is the formula for Merchandise Net Operating Income?
revenue- (cost of goods sold + operating expenses)= net operating income
What is usually broken down into categories based on product lines or shop activities?
revenues; cost of goods sold; gross margin; labor; rent; utilities; marketing and promotions; insurance; education and travel; golf car leases, payments, and expenses; depreciation; interest; tax
According to the Business Planning Course Manual, what is usually the largest contributor to the bottom-line profit of the facility?
rounds
What metric should be part of every forecast regardless of the type of facility?
rounds: directly affects the health of most of the departments and revenue sources at a facility.
What is one of the techniques used to validate assumptions
scenarios and sensitivity analysis; historical review; expert review
A cash budget records cash and credit transactions. (T / F)
False- operating budget reflects accrual accounting, where sales and expense transactions are recorded when they occur
The SWOT analysis would treat opportunities and threats as factors that usually can be controlled by the facility. (T / F)
False- opportunity and threat are external factors (cannot be controlled by facility)
The divisor in the linear trend formula-average percentage is the number of years of change being measured. (T / F)
False- the divisor is number of calculations
Linear trend analysis and base year analysis are examples of vertical analyses. (T / F)
False-both are horizontal analysis
Long-range planning should initially assume an adversarial relationship between neighboring facilities that directly compete with each other. (T / F).
False
Consider the following statement as part of a business plan: "Improve range profits and customer satisfaction." According to the Business Planning course, this statement is an example of an objective. (T / F)
False- an objective has to be SMART, objectives need to be specific not vague
Cost of goods sold is an example of qualitative data. (T / F).
False- cogs its a number which means its a quantitative data
Opening a new driving range 5 miles away would be a relevant factor for making assumptions about the number of rounds likely to be played in the coming year. (T / F)
False- driving range 5 miles away is not relevant to play
Changing the budget when the facility is falling short of budget projections is both unacceptable and unproductive. (T / F)
False- falling short of budget projections may require a change in the way the plan is being implemented rather than an adjustment in the budget
Customer demographics is an internal factor. (T / F)
False- internal factors are factors that can be controlled by the facility
The new manager of a ten-year-old private course, currently doing an average of 5,000 tournament rounds per year, proposes to increase tournament rounds by 50% by the end of next year. This proposal meets the criteria for an effective business objective as presented in the Business Planning Course Manual. (T / F)
False- not realistic...to increase 50% from 5000 tournament rounds is a lot
"Develop and promote group lesson programs aimed at women and juniors "is an example of an effective business objective. (T / F)
False- not time oriented or specific
What should govern the decision to pursue an opportunity?
How long will the opportunities be viable? Which opportunities must be acted on immediately? and which later?
You are in the process of completing a business plan for the golf shop. Initial forecasts of sales, expenses, and profit have been made. Past data has been analyzed and important inside and outside factors have been identified. What is the next step to be taken towards completing the plan?
Monitor Performance-(the final stage of business planning)
The utility of your business plan for managing day-to-day operations in a golf shop depends on your ability to manage internal factors. (T / F)
True- because golf course can control the day to day operations in the golf shop by maintaining staff with good training and customer service
A facility profile defines the overall culture of the business. (T / F)
True- facility is the business assets, target markets, and customers
Assumptions are necessary for forecasting numbers. (T / F)
True- must be kept with business plan and financial forecasts
The interpretation of quantitative data is less susceptible to differences of opinion than qualitative data. (T / F)
True- quantitative data:clearly defined and less susceptible to differences of opinion; qualitative data: can be interpreted in multiple ways
Calculating yield involves knowing the relationship between the amount utilized and the amount available. (T / F)
True- ratio of rounds actually played to the number of rounds available
According to the Business Planning Model, a business plan should build on and refine the operational plan. (T / F)
True-usually updating or revisiting how business is defined
In his first year at a golf club, the Head Professional has made some assumptions about how improvements in customer services will increase the coming year's sales volume. What technique could be used to best test these assumptions?
expert review= to test their assumptions and run them by experienced professionals
A vision defines the short-term objectives that must be accomplished in the upcoming year. (T / F)
false- visions are long-range plans
The utility of a business plan for managing day-to-day operations depends on the accuracy of your assumptions. (T / F)
false-assumptions can be changed/adjusted based on errors
In a cash budget, transactions are only recognized at the time they occur. (T / F)
false-not recorded until it is actually credited, not at the time it is done
What is the most significant benefit of strategic business planning?
gives the organization a competitive advantage and enables it to successfully meet its objective
What is an example of a financial strategy?
increasing/decreasing fees in one or more department; borrowing money for investment purposes
It is appropriate to address the role of the employee in the mission statement. (T / F)
True
Lack of a mission statement is an example of a weakness that a SWOT analysis might disclose? (T / F)
True
The process for developing a business plan starts before you establish the goals you would like to achieve for the shop's coming year. (T / F)
True-they first must fully understand where business is now before long term vision
What is the process called when the manager reviews total rounds to determine who is playing and when?
Yield Analysis
The following agenda was part of a golf range business plan: "Purchase 175 dozen new range balls and rotate usage three times a year. Who: Head Professional. When: End of First Quarter. Cost: $1500." According to the Business Planning course, describe the business plan component represented by this statement?
objective, strategy, and action plan
Who should provide direction for creating the business plan at a golf operation?
PGA professionals
What does a performance metric provide?
to track the performance of the facility
What is one example of a performance metric?
-number of rounds -yield management -revenues per round -COGS as % of sales -gross margin as a % of sales
What is the usual business destination for long-range planning?
3-5 year plans that identify a future "destination" for a business; includes long term goals and financial forecast to help business achieve its vision
Golf shop sales of $100,000 yield a gross margin of $30,000. What is the percentage of the cost of goods?
70,000/100,000=0.7 70%
A golf professional is purchasing a golf course. The business plan he presented to his banker included his history of successfully operating similar facilities, budget projections for the first five years under his management, and objectives and strategies for reaching his goals. The banker rejected his loan application because of missing information. What important element is missing from the business plan?
Define the business: facility's purpose and direction including core values, vision and mission; foundation of the entire business planning process
Conducting a base year analysis is a good choice for a facility that has just completed a project that added nine new holes to the original 9-hole course. (T / F)
True-base year analysis is best used when a major change happened in that year ex. new ownership of golf course, new head pro hired, curse renovated, new operation added
Trends in local consumer spending would be most useful for evaluating a core business function (T / F)
True-because it ultimately affects the spending and maybe a threat to the course for poor economy
The total annual sales for a golf shop for the past five years are listed below: T otal Year Annual Sales 1 $ 98,000 2 $100,000 3 $123,000 4 $121,000 5 $133,000 Based on a simple trend projection, what is the most reasonable expectation for the coming year? What is the average percent change?
process: [(y2-y1)/y1 + (y3-y2)/y2 + (y4-y3)/y3 + (y5-y4)/y4]/4 =0.08 =8%
Consider the following table. Based on trend analysis, what forecast would be made on the number of weekend rounds that will be played in year five? YEAR: 12345 WEEKENDROUNDS: 16,000 14,500 16,800 17,400 ?
process: (y2-y1)/y1 + (y3-y2)/y2 + (y4-y3)/y3= .101/3=0.034 y4 x 0.034=591 y4+591= 17,991
What method do managers use to increase their knowledge of financial performance and controls?
spot audits:crucial in tracking and controlling inventory and financial performance
What examples would be considered internal data sources for planning purposes?
staffing, course maintenance, types of amenities, and business marketing and promotions-basically any info that can be generated onsite
If the gross target margin for your golf shop were 40 percent, what would be the target percentage for your cost of goods sold?
total merchandise sales (100)-cost of goods sold=gross margin(40); then cost of goods sold would be 60%
An important feature of a cash budget is cash flow patterns for the past 12 months are clearly indicated. (T / F)
true
Financial forecasts should be based on historical data derived from a linear trend analysis. (T / F)
true
Gross profit is what remains after calculating the difference between revenue and cost of goods. (T / F)
true
The results of a SWOT analysis could be sufficient justification for the abandonment of a core business function. (T / F)
true
The projected customer base of certain golf facilities located in the United States could assume members drawn from international markets. (T / F)
true-for some renowned courses and resorts
Mission statements should include a definition of the facility's underlying financial model. (T / F)
False- a brief statement of a facility's purpose. It is a "why we exist" statement
Your finalized operating budget will show whether or not you have the money to pay. (T / F)
False-cash flow budgets show whether the facility's cash on hand is sufficient to cover expenses
A yield analysis is used to compile a facility's historical data on the number of rounds played. (T / F)
False-finds out who is playing and when they're playing...identifies most frequent customers who generate most revenue
Depreciation allowances must be accounted for in a cash flow budget. (T / F).
False-for capital budget not cash flow
A facility's financial objectives could be achieved through operational strategies alone. (T / F)
False-operational strategy is only one of three objective strategies...financial objectives should be achieved through financial strategies
What is the functionally significant difference between goals and objectives?
Goals=measurable long term desired outcome that takes 3-5 years to achieve Objectives=short term outcome within a fiscal year to achieve a long term goal.
What important characteristic is missing in the business objective: "Increase pro shop sales next year?"
It's not specific or meaningful. it does not include a specific outcome of how much increase in pro shop sales they will achieve.
Which characteristic of goals and objectives is described as capable of being observed, recorded, and measured?
Specific- objective must be tied to specific outcomes that can be observed, recorded, measured
Staff evaluations are a relevant data source for a SWOT analysis. (T / F)
True- staffing=job descriptions, hiring, training, scheduling, evaluating, continuing education
A sound mission statement defines the long-term vision and core values of a facility. (T / F)
True-a successful mission statement sets the stage for integrating the vision and core values of the organization seamlessly
A capital budget is used for large-value items such as equipment and fixtures. (T / F)
True-capital budget projects the expenses associated with those purchases and large scale projects like construction or renovations or equipment
Revising forecasts and budgets is one way to keep a business solvent in the event of unforeseen external changes. (T / F)
True-many business scale back plans for growth and revise their revenue projections in order to simply keep the business solvent
Helping establish a starting point for goals, objectives, and related strategies is an appropriate use of the SWOT analysis. (T / F)
True-swot helps determine facility strengths, weaknesses, opportunities, and threats...helps establish a starting point for new goals, objectives, and strategies
Raising or lowering green fees is a reasonable response to an underperforming budget. (T / F)
True-yield management=raising green fees can reduce total revenues, while lowering green fees may increase more traffic but increase total revenue
What is the baseline reason for analyzing variances?
better to spot variances early and take remedial action before they escalate into major business concerns
For the purpose of developing a business plan, what is the best description of trend analysis?
calculates the percentage change up or down from year to year in an individual line item;gives planners a good understanding of past performance...evaluates positive and negative trends over time
What information should form the basis of a golf shop's 12-month operating budget?
full time staff, wages, utilities
What best describes sensitivity analysis?
generate several scenarios by entering different values for assumptions; process that helps you consider best/worst case scenarios and how they will affect performance
Next year you will be replacing a long-time golf shop employee with a new assistant who has considerable sales experience and selling skills. You will be paying this new staff member a higher salary. What is a reasonable assumption for you to make?
golf shop revenues increase due to new marketing techniques
Your employer is contemplating an increase in weekend green fees. She would like to know how this increase might affect the number of rounds played. What would provide her with the best estimate?
historical review= finding analogous situations in the past ex. to test how price increases might affect volume
A cash flow budget is primarily concerned with what measure?
how much money a facility will have in the bank at the end of the month or week; whether or not a facility has enough money to pay the bills
What type of information is typically provided by qualitative data?
informs the team about the quality of the business offerings, such as conditions of the course, enjoyment/satisfaction of customers, flavor of food... "now" and "why" things happen
What is the correct budget category for labor forecasts?
it goes under golf expenses under the operating budget
What would be the most appropriate initial response to facility income not meeting projections?
it would be appropriate to modify their actions in order to achieve the objectives, after carefully monitoring results
How might revenues be affected at a nearby daily fee course if the local tire plant has major layoffs?
it would do poorly because it is a threat to the golf course. The economy of the local community would not do as well.
What events would cause a change in the forecast for golf shop expenses?
labor, maintenance, training, hourly workers
You are concerned about a decline in business growth. What method would be most effective in portraying your overall financial history?
linear trend analysis
What is the most significant benefit of a point-of-sale system to a manager?
most of them automatically calculate the amount and/or percentage above or below....plan the actual numbers at the end of the day, week and month