Lodging Operations Financial Management
Mock Exam
Course Introduction
Lodging Operations Financial Management focuses on the financial principles and analytical skills necessary for effective management within the lodging industry. The course covers topics such as interpreting financial statements, budgeting, revenue management, cost control, and performance measurement specific to hotels and other lodging facilities. Students learn to apply financial tools and techniques to optimize profitability, allocate resources, and support strategic decision-making in both independent and chain-operated lodging environments. Practical case studies and industry examples are used to reinforce understanding of financial concepts and their application to daily operations and long-term planning within the lodging sector.
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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Sample Questions
Q1) The value of dividends is not affected by the date they are received.
A)True
B)False
Answer: False
Q2) The goal of hospitality financial management is to maximize the wealth of the owners.
A)True
B)False
Answer: True
Q3) 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
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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) A government agency involved in the secondary mortgage market is A)FDIC.
B)Fannie Mae.
C)GAO.
D)IRS.
Answer: A, B
Q2) The return on commercial paper is guaranteed by the federal government.
A)True
B)False
Answer: False
Q3) Forward contracts are easier to sell than a futures contract.
A)True
B)False Answer: False
Q4) The first stock issue available to the public is called A)a first sale.
B)secondary trading.
C)an IPO.
D)stock hedging.
Answer: C
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Chapter 3: Review of Financial Statements and Selected
Ratios
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Sample Questions
Q1) Dividends
A)increase retained earnings.
B)reduce retained earnings when declared.
C)reduce retained earnings when paid.
D)are an operating expense like food cost.
Answer: B
Q2) Cash is found in the owner's equity account.
A)True
B)False
Answer: False
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
Q4) Liquidity ratios measure the amount of long-term debt held by the firm.
A)True
B)False
Answer: False
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Chapter 4: The Relationship Between Risk and Return
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Sample Questions
Q1) The best definition of "risk" is
A)taking a chance.
B)not being able to understand all the outcomes.
C)uncertainty about an outcome.
D)how large the outcome is.
Q2) If we plot the risk-return profile of a project on a graph and it falls below the Security Market Line, the project is creating value.
A)True
B)False
Q3) The beta of the market portfolio is A)+1.0.
B)0.
C)-1.0.
D)the market portfolio does not have a beta.
Q4) The variance is the square root of standard deviation. A)True B)False
Q5) The risk of an investment is best measured by its expected return. A)True
B)False
6
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Chapter 5: Time Value of Money
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Sample Questions
Q1) You plan to invest $2,000 annually. The first $2,000 will be invested on your 22<sup>nd</sup> birthday and the last $2,000 will be invested on your 49<sup>th</sup> birthday. What is the value of this investment on your 50<sup>th</sup> birthday if all invested funds earn 8% annually?
A)$205,931.87
B)$190,677.66
C)$188,677.66
D)$174,701.54
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
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Page 7
Chapter 6: Fixed Income Securities: Bonds and Preferred Stock
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Sample Questions
Q1) A 101/2% bond matures in 11 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 10% rate of return?
A)$1,020.77
B)$1,032.48
C)$1,032.91
D)$583.35
Q2) Which of the following is not a restrictive covenant?
A)call feature
B)limitations on additional debt
C)dividend payment limitations
D)restrictions on firm activities
Q3) What is the yield to maturity on a share of Hospitality Properties A $2.38 preferred stock to an investor who buys the preferred stock at $28.50? Assume dividends are paid annually.
A)8.35%
B)8.50%
C)8.21%
D)8.70%
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Chapter 7: Common Stock
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Sample Questions
Q1) Investors view common stock as a riskier investment than bonds or preferred stock.
A)True
B)False
Q2) Lapidus Restaurants Incorporated currently pays a $5.00 common stock dividend. The dividend is expected to remain at $5.00 and not expected to grow in the future. What is the current value of Lapidus Restaurants common stock to an investor requiring an 11% rate of return?
A)$100.00
B)$83.33
C)$50.45
D)$45.45
Q3) Valuing common stock is less difficult and more precise than valuing bonds.
A)True
B)False
Q4) In the case of corporate bankruptcy, common stock's residual claim becomes especially valuable.
A)True
B)False
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Page 9
Chapter 8: Cost of Capital
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Sample Questions
Q1) Which of the following is typically not treated as one of the components of capital in cost of capital schedule calculations?
A)long-term debt
B)short-term debt
C)common equity
D)preferred stock
Q2) Which answer appropriately ranks the securities according to seniority risk, from highest risk first to lowest risk last?
A)common stock, bonds, preferred stock
B)preferred stock, common stock, bonds
C)common stock, preferred stock, bonds
D)bonds, preferred stock, common stock
Q3) If a project is to be 100% financed with debt, then the cost of debt-not the weighted average cost of capital-should be used to evaluate the project.
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) Indirect cash flows caused by a capital budgeting project are not relevant to the project investment decision.
A)True
B)False
Q2) Growth oriented capital budgeting projects typically do not require an increase in net working capital.
A)True
B)False
Q3) Which one of the following is not part of a project's estimated net cash flows?
A)the expected loss in your firm's other businesses due to a new project
B)the cost of a customer survey performed one year before the project decision is made
C)the change in depreciation
D)the change in cash operating costs
Q4) The after-tax salvage value from replaced assets will decrease the net investment.
A)True
B)False
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11
Chapter 10: Capital Budgeting Decision Methods
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Sample Questions
Q1) 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
Q2) If a capital budgeting project's cash flows are not normal, the internal rate of return method should be used to make the investment decision.
A)True
B)False
Q3) A project's net present value is the sum of the future values of the net cash flows compounded at the required rate of return minus the net investment.
A)True
B)False
Q4) A project's payback period is the amount of time required for the project's net cash flows to recover or pay back the net investment.
A)True B)False
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Chapter 11: An Introduction to Hotel Valuation
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Sample Questions
Q1) The highest and best use for a parcel of land is always a commercial use.
A)True
B)False
Q2) A historical supply and demand analysis is
A)not relevant because the appraiser only worries about future events.
B)a good starting point in order to make projections.
C)all an appraiser needs to make effective projections.
D)usually too time-consuming to include in the appraisal.
Q3) If you were appraising a church, which approach to value would be best to use?
A)sales comparison approach
B)cost approach
C)income capitalization approach
D)revenue multiplier
Q4) Which of the following would have the greatest potential impact on the hotel?
A)an increase in the population
B)the construction of a new office building housing a new local law firm
C)a major employer leaves the market area
D)an increase in the number of residential building permits
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13
Chapter 12: Capital Structure
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Sample Questions
Q1) The desire to maintain excess borrowing capacity will tend to increase the use of debt financing in a firm's capital structure.
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) Financial risk is the basic risk inherent in the operations of a firm. It can be viewed as the volatility of a firm's EBIT.
A)True
B)False
Q4) 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.
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Page 14