Tourism and Hospitality Finance
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Course Introduction
Tourism and Hospitality Finance explores the fundamental financial principles and practices within the tourism and hospitality industries. The course covers key topics such as financial statement analysis, budgeting, revenue management, cost control, and investment decision-making as they apply to hotels, resorts, travel agencies, and related businesses. Students will learn how to interpret financial data, develop financial plans, assess performance, and make informed managerial decisions to enhance profitability and support sustainable growth. Industry case studies and real-world scenarios equip students with practical skills to navigate the unique financial challenges and opportunities in tourism and hospitality settings.
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
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Sample Questions
Q1) 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
Q2) Financial management is the process of classifying financial information.
A)True
B)False Answer: False
Q3) The most common form of business organization in the United States is the sole proprietorship.
A)True
B)False Answer: True
Q4) The value of dividends is not affected by the date they are received.
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) 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 market maker is someone who works for someone wanting to sell her stock. A)True
B)False
Answer: False
Q3) The return on commercial paper is guaranteed by the federal government. A)True
B)False Answer: False
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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) A manager at a local food service establishment recently calculated her food cost percentage to be 43%. This percentage is:
A)very high.
B)sort of low.
C)can't tell.
D)high, but not too high.
Answer: C
Q3) Treasury stock is an asset.
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) To obtain benefits from diversification, we need to hold assets where the correlation coefficient is
A)0.
B)+1.0.
C)-1.0.
D)none of the above.
Q2) Beta measures the total risk of an investment.
A)True
B)False
Q3) If two assets are perfectly positively correlated, we can put them together into a portfolio and completely eliminate risk.
A)True
B)False
Q4) The concept that the next dollar will not give as much happiness as the last dollar is known as
A)declining marginal utility for money.
B)inflation.
C)risk.
D)loss of purchasing power.
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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) You plan to borrow $20,000 and repay the loan with 48 equal monthly payments. Which of the following best describes this?
A)present value of a perpetuity
B)future value of an annuity
C)present value of an annuity
D)present value of a series of non-constant cash flows
Q3) 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) What is the yield to maturity on a $1,000 par value 93/4% bond purchased for $1,125?
Assume the coupon is paid annually and the maturity is 12 years.
A)8.16%
B)-8.16%
C)8.08%
D)7.90%
Q2) Which of the following has the highest seniority ranking?
A)junior, subordinated debenture
B)junior, unsubordinated debenture
C)senior subordinated debenture
D)senior, unsubordinated debenture
Q3) Which one of the following securities is collateralized secured)by specific assets?
A)debenture
B)common stock
C)referred stock
D)mortgage bond
Q4) Bonds and common stock are generally both classified as fixed income securities.
A)True
B)False
8
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Chapter 7: Common Stock
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Sample Questions
Q1) In the case of corporate bankruptcy, common stock's residual claim becomes especially valuable.
A)True
B)False
Q2) The valuation of common stock with zero growth is similar to the valuation of preferred stock.
A)True
B)False
Q3) 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
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9
Chapter 8: Cost of Capital
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Sample Questions
Q1) Young's Specialized Cruises plans to issue preferred stock at a price of $25 per share. The annual dividend will be $2.18 per share and issuance costs are expected to be $2.00 per share. What is the cost of raising funds with preferred stock for Young?
A)8.72%
B)9.48%
C)8.76%
D)8.00%
Q2) Issuance or flotation costs are the costs investors pay to brokers when they purchase common stock.
A)True
B)False
Q3) A firm's weighted average cost of capital is the average cost of the various short-term sources of financing employed by the firm.
A)True
B)False
Q4) Preferred stock has higher seniority than bonds and common stock.
A)True
B)False
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Chapter 9: Introduction to Capital Budgeting and Cash
Flow Estimation
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Sample Questions
Q1) Jose's Cantinas Incorporated plans to expand. This will require the acquisition of new equipment. The equipment will cost $85,000 including delivery and installation. Additional net working capital of $25,000 will be needed immediately. Land for the expansion cost Jose's $100,000 three years ago, but could be sold to net $200,000 after taxes today. Compute the net investment for this project.
A)$185,000
B)$310,000
C)$210,000
D)$285,000
Q2) 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 $6,000, what is the after-tax cash flow to Poon's Noodle House? Use 40% for the effective tax rate.
A)$8,400
B)$3,600
C)$2,400
D)$7,600
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Chapter 10: Capital Budgeting Decision Methods
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Sample Questions
Q1) 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
Q2) Which of the following is true for a project with an expected net present value of $200,000?
A)The project is clearly unacceptable.
B)The project's cash flows exceed the project's net investment by $200,000 annually.
C)The project is expected to increase firm value by $200,000 in future value terms.
D)The project is expected to increase firm value by $200,000 in present value terms.
Q3) Which of the following is not true of the payback period method?
A)It fails to take into account the time value of money.
B)It fails to take into account a project's net cash flows.
C)It fails to take into account a project's net cash flows after the payback period.
D)There is no objective criterion for what is an acceptable payback period.
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12
Chapter 11: An Introduction to Hotel Valuation
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Sample Questions
Q1) An estimate of value is good for
A)one day.
B)one month.
C)three months.
D)one year.
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 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
Q4) Many hotel appraisals in the past have underestimated the true replacement cost of furniture, fixtures, and equipment.
A)True
B)False
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Page 13
Chapter 12: Capital Structure
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Sample Questions
Q1) 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.
Q2) 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
Q3) The many factors influencing business risk can be placed in one of two categories. What are these two categories?
A)factors affecting sales revenue and those affecting assets
B)factors affecting assets and those effecting costs
C)factors affecting operating costs and those affecting financial costs
D)factors affecting sales revenue and those affecting costs
Q4) 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.
Page 14
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