Hotel and Restaurant Accounting Exam Practice Tests
Course Introduction
Hotel and Restaurant Accounting focuses on the foundational principles and specialized accounting practices used in the hospitality industry. Students will learn to apply accounting concepts to real-world scenarios related to hotel and restaurant operations, including revenue tracking, cost control, payroll, inventory management, and financial reporting. Emphasis is placed on understanding the Uniform System of Accounts for the Lodging Industry (USALI), budgeting, and the analysis of financial statements to support managerial decision-making. The course equips learners with the essential skills needed to manage financial operations, ensure regulatory compliance, and contribute to the profitability and sustainability of hospitality businesses.
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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Chapter 1: Introduction
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27 Verified Questions
27 Flashcards
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Sample Questions
Q1) The goal of hospitality financial management is to maximize the wealth of the owners.
A)True
B)False
Answer: True
Q2) Which of the following makes preferred stock different from common stock?
A)Common stockholders receive dividends.
B)Common stockholders get paid after the bondholders.
C)Common stockholders can vote for the board of directors.
D)Dividends to common stockholders are tax deductible.
Answer: C
Q3) Preferred stock is a security that has the features of both debt and equity.
A)True
B)False
Answer: False
Q4) Shirking is considered an agency problem.
A)True
B)False Answer: True
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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) You manage a McDonald's in Germany. At the beginning of the year, the exchange rate was $1 = 1Euro. At the end of the year, the exchange rate is $1 = .90Euro. You report profits of 450,000 Euros. How much have your profits increased in terms of dollars from the exchange rate change during the year?
A)10%
B)90%
C)11.11%
D)unkown from information given
Answer: C
Q2) A measure of uncertainty in stock returns is
A)weighted average.
B)mean.
C)correlation coefficient.
D)standard deviation. Answer: D
Q3) American hospitality companies really don't have to worry about foreign currency. A)True
B)False
Answer: False
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Page 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) The DuPont ratio shows that return on assets is a function of
A)current ratio and debt ratio.
B)profit margin and asset turnover.
C)profit margin and inventory turnover.
D)debt ratio and number of times interest earned.
Answer: B
Q2) Another name for department profit is
A)net income.
B)revenue.
C)contribution margin.
D)taxable income.
Answer: C
Q3) The DuPont ratio is a combination of two ratios. These are the profit margin and the solvency ratio.
A)True
B)False
Answer: False
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Page 5
Chapter 4: The Relationship Between Risk and Return
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Sample Questions
Q1) The correlation coefficient ranges from -1.0 to +1.0.
A)True
B)False
Q2) The "expected value" is
A)the mean.
B)the weighted average.
C)both a and b.
D)the greatest outcome.
Q3) All else being equal, risk averse investors prefer wider, flatter distribution of returns around the mean.
A)True
B)False
Q4) The coefficient of variation measures the amount of risk for a given level of return.
A)True
B)False
Q5) The idea of diversification is to maintain a level of return and decrease your risk.
A)True
B)False
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Chapter 5: Time Value of Money
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30 Verified Questions
30 Flashcards
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Sample Questions
Q1) An infinite annuity is called a perpetuity.
A)True
B)False
Q2) Which of the following properly describes the future 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) Suppose you are investing money at a 10% annual nominal interest rate. To earn as much as possible, which one of the following compounding periods should you prefer?
A)daily
B)weekly
C)monthly
D)annually
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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Chapter 6: Fixed Income Securities: Bonds and Preferred Stock
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30 Flashcards
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Sample Questions
Q1) Interest on a bond is a tax-deductible cost for the paying corporation. A)True
B)False
Q2) What is a bond's market price when the required rate of return on the bond is less than the coupon rate?
A)The bond's price is less than the par value.
B)The bond's price is the same as the par value.
C)The bond's price is greater than the par value.
D)None of the above.
Q3) Corporate bonds are generally considered perpetual. A)True B)False
Q4) The term "preferred" in preferred stock refers to which of the following?
A)Preferred stock has a claim on the firm's assets prior to suppliers.
B)Preferred stock has a claim on the firm's assets prior to debt bonds).
C)Preferred stock has a claim on the firm's assets prior to common stock.
D)Preferred stock has a claim on the firm's assets prior to employees.
Q5) Bonds and common stock are generally both classified as fixed income securities. A)True B)False
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Chapter 7: Common Stock
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Sample Questions
Q1) Gongoras Gorgeous Hotels currently pays a $1.80 common stock dividend. Dividends have been recently growing at a 10% annual rate and are expected to continue growing at this rate for the next 2 years. Thereafter the growth rate is expected to be 4% for the foreseeable future. What is the current value of Gongoras common stock to an investor requiring an 18% rate of return?
A)$14.14
B)$11.00
C)$14.86
D)$13.09
Q2) Which of the following is not a defining feature of common stock?
A)a residual claim on assets
B)voting rights
C)a residual claim on cash flows
D)a fixed return
Q3) Valuing common stock is less difficult and more precise than valuing bonds.
A)True
B)False
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) Penny's Budget Gourmet Restaurants has a current capital structure that is 70% equity, 20% debt, and 10% preferred stock. This is considered optimal. Penny is considering a $100 million capital budgeting project. Penny has estimated the following: After-tax cost of debt: 7.0%
Cost of preferred stock: 8.0%
Cost of internal equity: 13.0%
Cost of external equity: 15.0%
Penny expects to have $40 million of new retained earnings available to finance this project. What is Marion's cost of capital for this project?
A)12.10%
B)10.75%
C)11.90%
D)12.45%
Q2) A firm's weighted average cost of capital is a marginal measurement meaning it is concerned with measuring the cost of funds already raised and previously invested in the firm.
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) Poon's Noodle House is considering replacing their noodle-processing machine. The current machine was purchased 4 years ago at a total cost of $20,000. It is being depreciated straight-line to a zero value over 8 years. If Poon sells the noodle-processing machine for $10,000, what is the after-tax cash flow to Poon's Noodle House? Use 40% for the effective tax rate.
A)$6,000
B)$4,000
C)$10,000
D)$14,000
Q2) The after-tax salvage value from replaced assets will decrease the net investment.
A)True
B)False
Q3) When making a capital budgeting decision, cash flows should be estimated on an incremental basis, not a total basis.
A)True
B)False
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11
Chapter 10: Capital Budgeting Decision Methods
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Sample Questions
Q1) Which of the following is true for 5-year project with a 3-year payback period?
A)The net present value is negative.
B)The net present value is zero.
C)The net present value is positive.
D)Not enough information to determine anything about the project's net present value.
Q2) A capital budgeting project has a net investment of $250,000 and is expected to generate net cash flows of $90,000 annually for 5 years. What is the profitability index at a 13% required rate of return?
A)1.27
B)1.80
C)1.24
D)1.30
Q3) Which one of the following capital budgeting decision methods measures how long it takes for a project's benefits to recover the project's cost?
A)profitability index
B)payback period
C)modified internal rate of return
D)net present value
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Chapter 11: An Introduction to Hotel Valuation
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46 Verified Questions
46 Flashcards
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Sample Questions
Q1) When completing the sales comparison approach, inferior properties are adjusted downward.
A)True
B)False
Q2) Which of the following is typically used in the cost approach?
A)reproduction cost
B)replacement cost
C)aging cost
D)valuation cost
Q3) The first step in the appraisal process is to understand the nature of the appraisal problem.
A)True
B)False
Q4) The rate used to determine the sales price of a hotel at the end of a holding period is called the terminal capitalization rate.
A)True
B)False
Q5) A good definition of real estate is the land, building, and everything in it.
A)True
B)False
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Chapter 12: Capital Structure
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Sample Questions
Q1) Financial risk is the risk arising from the use of fixed cost sources of financing.
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) What is financial risk?
A)the risk arising from a firms over reliance on short-term sources of financing
B)the ordinary business risk arising from a firm's basic operations
C)the risk arising from a firm's use of variable cost sources of financing
D)the risk arising from a firm's use of fixed cost sources of financing
Q4) How does high business risk affect firm risk?
A)Higher business risk increases the volatility of capital structure.
B)Higher business risk increases the volatility of EBIT.
C)Higher business risk increases the volatility of financial costs.
D)Higher business risk increases the volatility of the firm's asset structure.
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