Hospitality Accounting
Exam Answer Key
Course Introduction
Hospitality Accounting examines the foundational principles and practices of accounting as applied to the hospitality industry, including hotels, restaurants, and tourism operations. This course covers topics such as financial statements, cost control, revenue management, budgeting, payroll, and internal controls specific to hospitality businesses. Students will learn how to interpret and analyze financial data, make informed managerial decisions, and ensure regulatory compliance within the unique context of hospitality operations, preparing them for effective financial management in the industry.
Recommended Textbook
Hospitality Financial Management 1st Edition by Robert E. Chatfield
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12 Chapters
393 Verified Questions
393 Flashcards
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Page 2
Chapter 1: Introduction
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Sample Questions
Q1) The most common form of business organization in the United States is the sole proprietorship.
A)True
B)False
Answer: True
Q2) The three major decisions in financial management involve investing, financing, and the payment of dividends.
A)True
B)False
Answer: True
Q3) Agency problems arise because
A)some people just don't get along.
B)the principal is shirking from her responsibility.
C)people usually act in their own best interest.
D)you can never make much money working for someone else.
Answer: C
Q4) Financial management is the process of classifying financial information.
A)True
B)False
Answer: False
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Chapter 2: Financial Markets and Financial Instruments
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36 Verified Questions
36 Flashcards
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Sample Questions
Q1) When calculating a holding period of return, dividends are excluded.
A)True
B)False Answer: False
Q2) The return on commercial paper is guaranteed by the federal government.
A)True
B)False Answer: False
Q3) A college education can be considered an investment.
A)True
B)False
Answer: True
Q4) Futures contracts only are used with physical commodities.
A)True
B)False Answer: False
Q5) Interest expense is tax deductible but dividends are not.
A)True
B)False
Answer: True
Page 4
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Chapter 3: Review of Financial Statements and Selected
Ratios
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Sample Questions
Q1) Securities held by the firm for more than are year are classified as
A)temporary investments.
B)marketable securities.
C)deferred investments.
D)long-term investments.
Answer: D
Q2) Which of the following is an example of an "other" asset?
A)prepaid insurance
B)deferred income taxes
C)treasury stock
D)patents
Answer: D
Q3) Which of the following is a limitation of ratio analysis?
A)Many ratios can be easily calculated.
B)Ratios provide lenders, investors, and managers with important information.
C)Ratios are more meaningful when compared to some standard of performance.
D)Ratios there are too many different types of ratios.
Answer: C
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Chapter 4: The Relationship Between Risk and Return
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Sample Questions
Q1) Financial risk can be defined as the uncertainty around an expected outcome.
A)True
B)False
Q2) If two assets have returns that move together perfectly, their correlation coefficient is
A)+1.0.
B)-1.0.
C)0.
D)none of the above.
Q3) The variance is the square root of standard deviation.
A)True
B)False
Q4) An investment's return should always be inversely related to its risk.
A)True
B)False
Q5) Even the desire for money exhibits a declining marginal utility.
A)True
B)False
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Chapter 5: Time Value of Money
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Sample Questions
Q1) The first payment of a deferred annuity is deferred more than one period into the future.
A)True
B)False
Q2) Which of the following properly describes the present value of an annuity due?
A)The first payment is one period after the present value.
B)The last payment is one period after the future value.
C)The first payment is on the same date as the present value.
D)The last payment is on the same date as the future value.
Q3) Odarta can afford to pay $12,000 at the end of each of the next 30 years to repay a home loan. If the interest rate is 5.50%, what is the most Odarta can borrow?
A)$174,404.94
B)$869,225.74
C)$218,181.82
D)$360,000.00
Q4) The future value of an annuity due is on the same date as the last payment.
A)True
B)False
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Page 7
Chapter 6: Fixed Income Securities: Bonds and Preferred Stock
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Sample Questions
Q1) Which of the following requires the issuing corporation to retire a portion of their bonds prior to maturity?
A)cumulative feature
B)call feature
C)put feature
D)sinking fund feature
Q2) A 73/8% bond matures in 10 years. Assuming the coupon is paid annually and the par value is $1,000, what is the value of this bond to an investor requiring a 9% rate of return?
A)$895.71
B)$887.69
C)$903.74
D)$848.83
Q3) A 12% bond matures in 14 years. Assuming the coupon is paid semiannually and the par value is $1,000, what is the value of this bond to an investor requiring a 15% rate of return?
A)$828.27
B)$872.66
C)$411.98
D)$826.40
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Chapter 7: Common Stock
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Sample Questions
Q1) Common stock's residual claim on assets implies owners have a prior claim on assets before other claim holders are paid.
A)True
B)False
Q2) If a corporation has two classes of common stock, what is typically unique about the second or class B common stock?
A)It has superior voting rights.
B)It has inferior dividend payments.
C)It has no voting rights.
D)It has superior dividend payments.
Q3) Why do investors require a higher expected rate of return on common stock than on bonds?
A)Common stock is a riskier investment than bonds.
B)Common stock is a lower risk investment than bonds.
C)Common stock has a shorter maturity than bonds.
D)Dividends are considered taxable income, but interest is not.
Q4) The most typical common stock maturity is 20 years.
A)True
B)False
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Chapter 8: Cost of Capital
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Sample Questions
Q1) Which of the following should not be included in a firm's cost of capital estimation?
A)the cost of permanent sources of short-term debt
B)the cost of common stock
C)the cost of retained earnings
D)the cost of seasonal sources of short-term debt
Q2) Tokyo Food Supplies Corporation sold an issue of 12-year bonds. The bonds sold at $980 each. After issuance costs, Tokyo Food Supplies received $975 each. The maturity value is $1,000 each and the coupon rate is 9% and paid annually. What is the after-tax cost of debt for these bonds if Tokyo Food Supplies' marginal tax rate is 40%?
A)5.61%
B)9.36%
C)9.28%
D)5.57%
Q3) Taxes are a relevant cost that should be accounted for in the firm's weighted average cost of capital.
A)True
B)False
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Page 10
Chapter 9: Introduction to Capital Budgeting and Cash
Flow Estimation
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Sample Questions
Q1) What is net working capital?
A)current liabilities minus current assets
B)current assets minus net fixed assets
C)current assets minus current liabilities
D)net fixed assets minus long-term liabilities
Q2) The after-tax salvage value from replaced assets will decrease the net investment.
A)True
B)False
Q3) Your university is considering what to do with the current football stadium. They plan to invest to upgrade the current football stadium or invest to build a new one closer to campus. What kind of projects are these?
A)contingent projects
B)mutually exclusive projects
C)independent projects
D)none of the above
Q4) In capital budgeting, the cost of starting a project is called the annual net cash flow. A)True
B)False
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Chapter 10: Capital Budgeting Decision Methods
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Sample Questions
Q1) A capital budgeting project has a net investment of $550,000 and is expected to generate net cash flows of $200,000 annually for 7 years. What is the payback period?
A)5.5 years
B)2.25 years
C)2.55 years
D)2.75 years
Q2) The net present value is the ratio of a project's benefits to its costs and the profitability index is the difference between a project's benefits and its costs.
A)True
B)False
Q3) Which one of the following capital budgeting decision methods determines a project's annual percentage rate of return?
A)modified internal rate of return
B)profitability index
C)discounted payback period
D)net present value
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Chapter 11: An Introduction to Hotel Valuation
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Sample Questions
Q1) Appraisals are often completed for lenders.
A)True
B)False
Q2) The first step in the appraisal process is to understand the nature of the appraisal problem.
A)True
B)False
Q3) Which approach uses one year's stabilized income to determine value?
A)yield capitalization
B)sales comparison
C)rooms revenue multiplier
D)direct capitalization
Q4) A 100-room hotel achieves a 70 percent occupancy and an average rate of $60. It sells for $4,600,000. What is the gross rooms revenue multiplier?
A)1.5
B)3.0
C)02
D)cannot tell from information given
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Chapter 12: Capital Structure
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Sample Questions
Q1) Increasing financial leverage decreases the volatility of owners' returns.
A)True
B)False
Q2) How does financial leverage affect firm risk?
A)Financial leverage increases the volatility of a firm's sales revenue.
B)Financial leverage increases the volatility of a firm's return on equity.
C)Financial leverage increases the volatility of a firm's EBIT.
D)Financial leverage increases the volatility of a firm's operating costs.
Q3) Which of the following is most likely to cause a firm to use less financial leverage?
A)currently low profits, but a large need for new funds
B)concern for the firm's Moodys and S & P bond ratings
C)low business risk
D)avoidance of a corporate takeover
Q4) What is a firm doing if it is using financial leverage?
A)Marketable securities is part of its assets structure.
B)It is using common stock as part of its capital structure.
C)It is using debt or preferred stock as part of its capital structure.
D)Accounts receivable is part of its asset structure.
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Page 14