Resort and Hotel Financial Management
Test Bank
Course Introduction
Resort and Hotel Financial Management provides an in-depth exploration of the financial principles and practices essential for managing the financial operations of resorts and hotels. The course covers key topics such as financial statement analysis, budgeting, revenue management, cost control, capital budgeting, and investment decision-making tailored to the hospitality industry. Students will learn how to interpret and utilize financial data to inform strategic planning, optimize profitability, and ensure fiscal responsibility. Through real-world case studies and industry-specific scenarios, learners gain the skills necessary to address the unique financial challenges faced by hospitality businesses and to drive sustainable financial success in resort and hotel environments.
Recommended Textbook
Hospitality Financial Management 1st Edition by Robert E. Chatfield
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393 Verified Questions
393 Flashcards
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Chapter 1: Introduction
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Sample Questions
Q1) The shareholders of a corporation have unlimited liability.
A)True
B)False
Answer: False
Q2) 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
Q3) Which of the following is the best description of how McDonald's created value for their owners in the breakfast market?
A)They generated additional revenues without increasing fixed costs.
B)They invented the Egg McMuffin.
C)They saved money by using the drive-through window.
D)The employees wear headsets so they can communicate to each other directly.
Answer: A
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3
Chapter 2: Financial Markets and Financial Instruments
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Sample Questions
Q1) The current yield of a bond is the rate of return on a bond if you hold it until maturity.
A)True
B)False Answer: False
Q2) American hospitality companies really don't have to worry about foreign currency.
A)True
B)False Answer: False
Q3) Financial markets only involve buyers and sellers of financial instruments.
A)True
B)False Answer: False
Q4) Most stock trading occurs on the secondary market.
A)True
B)False Answer: True
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Page 4
Chapter 3: Review of Financial Statements and Selected Ratios
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Sample Questions
Q1) The number of times interest earned is a
A)liquidity ratio.
B)turnover ratio.
C)profitability ratio.
D)solvency ratio.
Answer: D
Q2) A current ratio of less than 1.0 for a hospitality company is always bad.
A)True
B)False
Answer: False
Q3) Assets are held by the firm to generate revenues and cash flows.
A)True
B)False
Answer: True
Q4) The uniform system of accounts helps managers organize the statement of cash flows.
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 variance is the square root of standard deviation.
A)True
B)False
Q2) The normal distribution contains one-third of the outcomes to the right of the mean.
A)True
B)False
Q3) The best definition of risk averse is
A)never taking risks.
B)only taking small risks.
C)being compensated for taking risks.
D)none of the above.
Q4) The expected value of a distribution is also the mean.
A)True
B)False
Q5) We would expect the correlation coefficient between the number of days of sunshine and umbrella sales to be positive.
A)True
B)False
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Chapter 5: Time Value of Money
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Sample Questions
Q1) The future value of an annuity due is on the same date as the last payment.
A)True
B)False
Q2) What happens to the present value of an annuity as the interest rate increases?
A)It decreases.
B)It stays the same.
C)It increases.
D)All of the above.
Q3) An investment promises to return $1,000 at the end of each of the next 5 years and then $2,000 at the end of each of the next 10 years years 6 through 15). What is the value of this investment today at a 4% interest rate?
A)$16,429.84
B)$17,784.95
C)$11,421,37
D)$15,570.21
Q4) Everything else being the same, the higher the interest rate, the higher the present value.
A)True
B)False
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Chapter 6: Fixed Income Securities: Bonds and Preferred Stock
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Sample Questions
Q1) 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
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) Which of the following allows the investor to demand repayment for a bond prior to maturity?
A)put feature
B)call feature
C)sinking fund feature
D)cumulative feature
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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) Bednar's Bed & Breakfasts, Incorporated currently pays a $3.10 common stock dividend. Dividends have been recently growing at a 15% annual rate and are expected to continue growing at this rate for the next 2 years. Then dividends are expected to continue growing at a 10% rate for another 2 years years 3 and 4)and thereafter the growth rate is expected to be 5% for the foreseeable future. What is the current value of Casey's common stock to an investor requiring an 13% rate of return?
A)$47.87
B)$52.47
C)$27.42
D)$44.56
Q3) Common stock provides the investor a residual claim on both the firm's assets and the firm's cash flow.
A)True
B)False
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Page 9
Chapter 8: Cost of Capital
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Sample
Questions
Q1) Jose's Cantinas Incorporated plans to issue preferred stock at a price of $48 per share. The annual dividend will be $5.10 per share and issuance costs are expected to be $3.00 per share. What is the cost of raising funds with preferred stock for Jose's?
A)10.85%
B)10.20%
C)10.63%
D)11.33%
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
Q3) 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
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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) A project is expected to increase a firm's sales revenue by $50,000 annually, increase it cash expenses by $20,000 annually, and increase its depreciation by $15,000 annually. Given this information, what is the project's expected annual net cash flow? Use a 40% effective tax rate.
A)$24,000
B)$9,000
C)$21,000
D)$33,000
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Chapter 10: Capital Budgeting Decision Methods
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Sample Questions
Q1) 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
Q2) If a project's net present value is positive negative), the project is generally acceptable unacceptable).
A)True
B)False
Q3) A capital budgeting project's internal rate of return is the rate of return causing a project's net present value to equal the net investment.
A)True
B)False
Q4) 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
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Page 12
Chapter 11: An Introduction to Hotel Valuation
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Sample Questions
Q1) Visibility and access are critical components of a hotel site analysis.
A)True
B)False
Q2) The value in a forced sale is
A)market value.
B)assessed value.
C)liquidation value.
D)sale value.
Q3) Given a debt percentage of 40 percent, a mortgage constant of .12, and a required return on equity of 16 percent, what is the overall capitalization rate?
A)14 percent
B)13 percent
C)12 percent
D)none of the above
Q4) The fair share concept states that if a hotel represents 10 percent of room supply, it should accommodate 10 percent of market demand.
A)True
B)False
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Chapter 12: Capital Structure
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Sample Questions
Q1) 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
Q2) 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
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) Fixed cost sources of financing include both debt and common stock. A)True B)False
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