Hospitality Accounting Exam Preparation Guide
Course Introduction
Hospitality Accounting introduces students to the fundamental principles and practices of accounting as they pertain to the hospitality industry. The course covers topics such as the accounting cycle, financial statement preparation and analysis, revenue and expense recognition, budgeting, cash management, and internal controls specific to hotels, restaurants, and other hospitality organizations. Emphasis is placed on understanding financial data to make informed managerial decisions, comply with industry standards, and improve operational efficiency. Students will also explore unique aspects of hospitality accounting, such as the Uniform System of Accounts for the Lodging Industry (USALI) and relevant taxation issues.
Recommended Textbook
Hospitality Financial Management 1st Edition by Robert E. Chatfield
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12 Chapters
393 Verified Questions
393 Flashcards
Source URL: https://quizplus.com/study-set/3806 Page 2
Chapter 1: Introduction
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27 Verified Questions
27 Flashcards
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Sample Questions
Q1) You are the owner of a Comfort Inn and would like to hire a new general manager. In terms of preventing possible agency problems, what should you include in your offer?
A)a very high fixed salary
B)a fancy office with a private secretary
C)a 37-hour workweek
D)profit sharing
Answer: D
Q2) Value is created if a project's
A)incremental costs exceed incremental benefits.
B)incremental costs equal incremental benefits.
C)incremental benefits exceed incremental costs.
D)none of the above.
Answer: C
Q3) A good example of an agency relationship in a hotel is the relationship between a bartender and a server.
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) Which of the following is considered to have the lowest risk?
A)an Aa bond from Hilton Hotels
B)a Ba bond from Cendant Corporation
C)commercial paper from McDonald's
D)a treasury bill from the U.S. government
Answer: D
Q2) American hospitality companies really don't have to worry about foreign currency.
A)True
B)False
Answer: False
Q3) Assume you buy a share of stock for $20 and hold it for one year. During the year you receive $1.20 in dividends. At the end of the year you sell the stock for $19. What is your holding period return pre-tax)?
A)6.32%
B)1%
C)6.0%
D)5.0%
Answer: B
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4
Chapter 3: Review of Financial Statements and Selected Ratios
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36 Verified Questions
36 Flashcards
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Sample Questions
Q1) For current liabilities, "current" means
A)payable within the month.
B)payable within a year.
C)past due.
D)none of the above.
Answer: B
Q2) The uniform system of accounts helps managers organize the statement of cash flows.
A)True
B)False
Answer: False
Q3) A high inventory turnover ratio
A)is always good.
B)could indicate that we are buying too much inventory.
C)could indicate a problem with "stockouts."
D)means that our inventory is too costly.
Answer: C
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Page 5
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) Unsystematic risk can be diversified away in a portfolio.
A)True
B)False
Q3) All else being equal, risk averse investors prefer wider, flatter distribution of returns around the mean.
A)True
B)False
Q4) Even the desire for money exhibits a declining marginal utility.
A)True
B)False
Q5) The borrowing-lending line extending from the risk-free asset through the market portfolio is called the Capital Market Line.
A)True
B)False
Q6) An investment's return should always be inversely related to its risk.
A)True
B)False
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Chapter 5: Time Value of Money
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30 Flashcards
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Sample Questions
Q1) An infinite annuity is called a perpetuity.
A)True
B)False
Q2) You plan to invest $2,000 at the end of each of the next 25 years. If the investment earns 7% annually, what is the investment worth at the end of 25 years?
A)$132,748.33
B)$23,307.17
C)10,854.87
D)$126,498.08
Q3) The process of computing the present value of a future value is called discounting.
A)True
B)False
Q4) What happens to the future value of an annuity as the interest rate increases?
A)It decreases.
B)It stays the same.
C)It increases.
D)None of the above.
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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) Common stock has seniority relative to preferred stock.
A)True
B)False
Q3) Corporate bonds are generally considered perpetual.
A)True
B)False
Q4) The cumulative feature on preferred stock allows investors to accumulate more preferred stock at reduced prices.
A)True
B)False
Q5) A call feature allows the issuing corporation to repay the bond prior to maturity if it so wishes.
A)True
B)False
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Chapter 7: Common Stock
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Sample Questions
Q1) Into which two parts is a firm's earnings divided?
A)dividends and debt repayments
B)dividends and tax payments
C)dividends and addition to retained earnings
D)dividends and interest payments
Q2) Why is valuing common stock more difficult than valuing bonds?
A)Common stock is a long-term security and a bond is a short-term security.
B)Because bonds have more seniority than common stocks.
C)Because common stock is less risky to the investor than a bond.
D)It is more difficult to forecast future common stock cash flows than bond cash flow.
Q3) Dolci's Theme Parks currently pays a $1.00 common stock dividend. Dividends have been growing at a 5% annual rate and are expected to continue growing at this rate for the next 2 years. Thereafter the growth rate is expected to be 0% for the foreseeable future. What is the current value of Dolci common stock to an investor requiring a 16% rate of return?
A)$6.03
B)$9.55
C)$6.85
D)$6.56
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Page 9
Chapter 8: Cost of Capital
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Sample Questions
Q1) __________ represents the long-term or permanent sources of the firm's financing.
A)Financial structure
B)Equity structure
C)Capital structure
D)Leverage structure
Q2) Dou's Oriental Hotels, Incorporated sold an issue of 10-year bonds. The bonds sold at $995 each. After issuance costs, Dou's Oriental Hotels received $985 each. The maturity value is $1,000 each and the coupon rate is 7 5/8% and paid annually. What is the after-tax cost of debt for these bonds if Dou's Oriental Hotels' marginal tax rate is 40%?
A)7.70%
B)4.62%
C)7.85%
D)4.71%
Q3) Funds raised by the issuance of preferred stock are not considered part of a firm's capital.
A)True
B)False
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10
Chapter 9: Introduction to Capital Budgeting and Cash
Flow Estimation
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Sample Questions
Q1) The after-tax salvage value from replaced assets will decrease the net investment.
A)True
B)False
Q2) Which one of the following is not part of the estimated net investment for a capital budgeting project?
A)the estimated salvage value of the new assets at the end of their 10-year expected economic life
B)the immediate increase in net working capital required by the project
C)the after-tax salvage value of assets to be replaced by the project
D)the cost of new assets required by the project
Q3) Which one of the following is not a basic principle for estimating a project's net cash flows?
A)Sunk costs are relevant.
B)Cash flows should be estimated on an incremental basis.
C)Cash flows should be estimated on an after-tax basis.
D)Opportunity costs are relevant.
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11
Chapter 10: Capital Budgeting Decision Methods
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Sample Questions
Q1) Which of the following methods properly ranks projects' contribution to firm value when the projects have scale differences?
A)internal rate of return
B)modified internal rate of return
C)net present value
D)profitability index
Q2) The payback period is a useful measure of a project's
A)profitability.
B)economic life.
C)rate of return.
D)liquidity risk.
Q3) 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
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12
Chapter 11: An Introduction to Hotel Valuation
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Sample Questions
Q1) A good definition of real estate is the land, building, and everything in it.
A)True
B)False
Q2) When completing the sales comparison approach, inferior properties are adjusted downward.
A)True
B)False
Q3) If a hotel has 250 rooms and the competitive market has a total of 1,000 rooms, the hotel's fair share is:
A)100 percent.
B)50 percent.
C)25 percent.
D)cannot tell from information given.
Q4) The final reconciliation of value should
A)be an average of all the approaches used.
B)ignore the approaches not used.
C)be based on the approach that is considered the most reliable.
D)none of the above.
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13
Chapter 12: Capital Structure
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Sample Questions
Q1) An optimal capital structure minimizes a firm's cost of capital.
A)True
B)False
Q2) Which of the following is true at a firm's optimal capital structure?
A)The firm's cost of capital is minimized.
B)The firm is financed 100% with equity.
C)The firm's cost of equity is minimized.
D)The firm's cost of debt is minimized.
Q3) 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.
Q4) As a firm increases its use of debt financing, what is the impact upon the cost of equity?
A)The cost of equity decreases.
B)The cost of equity remains the same.
C)The cost of equity increases.
D)None of the above.
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