Certified Dietary Manager (CDM) Practice Exam

What does a Balance Sheet primarily describe?

1. The projected income for the next year

2. The operational costs of a facility

3. The facility's assets and liabilities

4. The employee performance evaluations

The correct answer is: The facility's assets and liabilities

The correct choice highlights that a Balance Sheet is a financial statement that provides a snapshot of a facility's financial position at a specific point in time. It details the facility's assets, which are the resources owned by the organization, as well as its liabilities, which are obligations owed to outsiders. The difference between assets and liabilities represents the equity or net worth of the facility. A Balance Sheet fundamentally serves to illustrate how well a facility can meet its short- and long-term obligations through the assets it controls. This financial overview is essential for management, stakeholders, and potential investors to assess the financial health and operational effectiveness of the facility. In contrast, other choices focus on different aspects of financial management that do not pertain to the function of a Balance Sheet. Projected income pertains to forecasting revenue, operational costs refer to the expenditures required for day-to-day operations, and employee performance evaluations concern workforce management and human resources rather than the financial structure depicted in a Balance Sheet.