Hotel and Restaurant Accounting Study Guide Questions
Course Introduction
Hotel and Restaurant Accounting explores the fundamental principles and practices of accounting as applied within the hospitality industry. The course covers key topics such as financial statements, cost control, budgeting, payroll, revenue management, and tax considerations specific to hotels and restaurants. Students will learn to analyze and interpret financial information, maintain accurate financial records, and apply accounting techniques to support managerial decision-making. Emphasis is placed on hospitality-specific systems, industry regulations, and the use of technology in financial management, equipping students with essential skills for success in the dynamic fields of hotel and restaurant operations.
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) 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
Q2) The earnings of a firm are not equivalent to its cash flows.
A)True
B)False
Answer: True
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
Q4) Preferred stock is a security that has the features of both debt and equity.
A)True
B)False
Answer: False
Page 3
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Chapter 2: Financial Markets and Financial Instruments
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Sample Questions
Q1) 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
Q2) Financial markets only involve buyers and sellers of financial instruments.
A)True
B)False
Answer: False
Q3) 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
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Page 4
Chapter 3: Review of Financial Statements and Selected
Ratios
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Sample Questions
Q1) All interested parties would like to have a high times interest earned ratio. A)True
B)False Answer: True
Q2) 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
Q3) Securities held by the firm for more than are year are classified as A)temporary investments.
B)marketable securities.
C)deferred investments.
D)long-term investments.
Answer: D
Q4) The balance sheet is good for a period of time. 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 risk of an investment is best measured by its expected return.
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) 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.
Q5) The Security Market Line represents a minimum return benchmark for an asset.
A)True
B)False
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Chapter 5: Time Value of Money
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Sample Questions
Q1) A money multiplier certificate is selling for $8,000 today and promises to be worth $10,000 in 3 years. What is the rate of return on this investment?
A)7.17%
B)19.28%
C)7.72%
D)11.93%
Q2) If an interest rate is compounded monthly, the annual nominal rate is greater than the effective annual rate.
A)True
B)False
Q3) Which of the following properly describes the present value of an ordinary annuity?
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.
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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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) Interest on a bond is a tax-deductible cost for the paying corporation.
A)True
B)False
Q3) Common stock has seniority relative to preferred stock.
A)True
B)False
Q4) 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.
Page 8
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Chapter 7: Common Stock
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Sample Questions
Q1) Casey's Sports Books currently pays a $2.30 common stock dividend. Dividends have been recently growing at a 12% annual rate and are expected to continue growing at this rate for the next 3 years. 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 14% rate of return?
A)$28.98
B)$32.11
C)$18.40
D)$28.62
Q2) Common stock's residual claim on assets implies owners have a prior claim on assets before other claim holders are paid.
A)True
B)False
Q3) If a corporation has two classes of common stock, what is typically unique about the second or class B common stock?
A)It has superior voting rights.
B)It has inferior dividend payments.
C)It has no voting rights.
D)It has superior dividend payments.
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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) The cost of capital raised by the issuance of bonds is typically lower than the cost of capital raised from the issuance of preferred stock or common stock.
A)True
B)False
Q3) Spencers Magic Shows Incorporated is financed 100% with equity and intends to remain this way. Spencers' common stock beta is 0.85, the expected market return average market return)is 14%, and the risk-free rate is 6%. If all of Spencers' equity is internal, what are the cost of equity and the weighted average cost of capital for Spencers?
A)12.80%
B)5.48%
C)14.00%
D)13.10%
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Page 10
Chapter 9: Introduction to Capital Budgeting and Cash Flow
Estimation
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Sample Questions
Q1) A project's net cash flows are typically cash inflows whereas a project's net investment is typically a cash outflow.
A)True
B)False
Q2) A firm is planning a project that will both expand the firm's operations and replace some of the older, less efficient assets of the firm. The new assets will cost the firm $200,000 plus an additional $5,000 for delivery and $25,000 for installation. Old assets being replaced have a book value of $50,000 and can be sold pre-tax for $40,000. The new project will require additional land. The land to be used was purchased three years ago for $75,000 but could be sold today for $140,000 net of taxes. The new project will require an increase of $20,000 in net working capital immediately. What is this project's net investment? Use 40% for the effective tax rate.
A)$350,000
B)$281,000
C)$390,000
D)$346,000
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Chapter 10: Capital Budgeting Decision Methods
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Sample Questions
Q1) If a project's net present value is positive negative), the project is generally acceptable unacceptable).
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) If a project's internal rate of return is greater less)than the required rate of return, the project is generally acceptable unacceptable).
A)True
B)False
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Chapter 11: An Introduction to Hotel Valuation
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Sample Questions
Q1) A 100-room hotel achieves a 70 percent occupancy and an average rate of $60. It sells for $4,600,000. What is the gross rooms revenue multiplier?
A)1.5
B)3.0
C)02
D)cannot tell from information given
Q2) Market value is usually the same as assessed value.
A)True
B)False
Q3) Appraisals are often completed for lenders.
A)True
B)False
Q4) 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.
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13
Chapter 12: Capital Structure
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Sample Questions
Q1) Bankruptcy costs are one type of financial distress cost.
A)True
B)False
Q2) An optimal capital structure minimizes a firm's cost of capital.
A)True
B)False
Q3) 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
Q4) Fixed cost sources of financing include both debt and common stock.
A)True
B)False
Q5) Increasing financial leverage decreases the volatility of owners' returns.
A)True
B)False
Q6) A firm's use of more debt financing creates more risk to owners and thus increases the cost of equity.
A)True
B)False
Page 14
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