Introduction to Hospitality Management
Final Test Solutions
Course Introduction
Introduction to Hospitality Management provides students with a comprehensive overview of the hospitality industry, including its history, structure, and current trends. The course covers key sectors such as lodging, food and beverage, travel and tourism, and event management. Students will explore the essential functions of hospitality operations, customer service principles, and management practices. Emphasis is placed on understanding the roles and responsibilities of hospitality professionals, developing strong communication and leadership skills, and examining ethical and sustainability considerations in the industry. This foundational course prepares students for advanced studies and careers in various segments of hospitality management.
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) 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) Which of the following is the difficulty in forming a Subchapter S Corporation?
A)The owners cannot be residents of the United States.
B)There can be no more than 75 owners.
C)The stock must have a very low par value.
D)The company must promise to pay dividends quarterly.
Answer: B
Q3) The three major decisions in financial management involve investing, financing, and the payment of dividends.
A)True
B)False
Answer: True
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Chapter 2: Financial Markets and Financial Instruments
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Sample Questions
Q1) An 81/2 09 bond is currently selling for 102.50. The principal amount is $1,000. The current yield on the bond is
A)8.5 percent.
B)9 percent.
C)8.29 percent.
D)none of the above.
Answer: D
Q2) The best way for a large hospitality firm to hedge a price increase in a commodity would be to
A)do nothing and hope the price will decrease.
B)dramatically increase the price on your menu.
C)buy a futures contract.
D)buy a lot of the product now from a local purveyor with a lot of cash.
Answer: C
Q3) A bond with a rating of AA is better than a bond rated AAA.
A)True
B)False
Answer: False
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Chapter 3: Review of Financial Statements and Selected Ratios
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Sample Questions
Q1) A high inventory turnover ratio
A)is always good.
B)could indicate that we are buying too much inventory.
C)could indicate a problem with "stockouts."
D)means that our inventory is too costly.
Answer: C
Q2) The income statement indicates firm performance between two balance sheet dates.
A)True
B)False
Answer: True
Q3) Which of the following is an example of an "other" asset?
A)prepaid insurance
B)deferred income taxes
C)treasury stock
D)patents
Answer: D
Q4) The statement of cash flows has three major components.
A)True
B)False
Answer: True
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Chapter 4: The Relationship Between Risk and Return
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Sample Questions
Q1) The best reason to hold the market portfolio is it
A)is the most efficient.
B)is the largest portfolio in the world.
C)has a lot of risk, but a lot of return.
D)only has unsystematic risk.
Q2) Unsystematic risk can be diversified away in a portfolio.
A)True
B)False
Q3) 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.
Q4) The bell curve is a graphical representation of
A)the normal distribution.
B)the standard deviation.
C)the variance.
D)half the outcomes of an experiment.
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Chapter 5: Time Value of Money
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Sample Questions
Q1) 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.
Q2) 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.
Q3) The future value of an annuity due is on the same date as the last payment.
A)True
B)False
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) Conceptually, the value of any investment security is the future value of the security's expected future cash flows earnings the investor's required rate of return until termination.
A)True
B)False
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) The Gizaw Corporation has a bond outstanding that matures in the year 2018. But the corporation can pay the bond back early at the corporation's option. What kind of feature is this option?
A)put feature
B)equity conversion feature
C)call feature
D)adjustable coupon rate feature
Q4) Common stock has seniority relative to preferred stock.
A)True
B)False
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Chapter 7: Common Stock
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Sample Questions
Q1) Why do investors require a higher expected rate of return on common stock than on bonds?
A)Common stock is a riskier investment than bonds.
B)Common stock is a lower risk investment than bonds.
C)Common stock has a shorter maturity than bonds.
D)Dividends are considered taxable income, but interest is not.
Q2) In the case of corporate bankruptcy, common stock's residual claim becomes especially valuable.
A)True
B)False
Q3) Valuing common stock is less difficult and more precise than valuing bonds.
A)True
B)False
Q4) 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
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Chapter 8: Cost of Capital
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Sample
Questions
Q1) Alishas Travel Tours expects to sell a new bond issue at its par value. The coupon rate is 10 7/8%. Because issuance costs are so small, Alishas plans to ignore the impact of issuance costs on the after-tax cost. What is the after-tax cost of these bonds if Alishas' marginal tax rate is 40%?
A)10.825%
B)4.35%
C)6.53%
D)15.225%
Q2) 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
Q3) Funds raised by the issuance of preferred stock are not considered part of a firm's capital.
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) Indirect cash flows caused by a capital budgeting project are not relevant to the project investment decision.
A)True
B)False
Q2) A capital budgeting project's sunk costs and opportunity costs are both relevant to the project investment decision.
A)True
B)False
Q3) Which one of the following is not part of the estimated net investment for a capital budgeting project?
A)the estimated salvage value of the new assets at the end of their 10-year expected economic life
B)the immediate increase in net working capital required by the project
C)the after-tax salvage value of assets to be replaced by the project
D)the cost of new assets required by the project
Q4) Growth oriented capital budgeting projects typically do not require an increase in net working capital.
A)True
B)False
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Chapter 10: Capital Budgeting Decision Methods
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Sample Questions
Q1) A capital budgeting project has a net investment of $450,000 and is expected to generate net cash flows of $150,000 annually for 5 years. What is the net present value at a 15% required rate of return?
A)$64,962
B)$52,823
C)$41,144
D)$300,000
Q2) 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
Q3) What is the profitability index for an acceptable capital budgeting project?
A)greater than 1.0
B)less than 1.0
C)greater than 0.0
D)less than 0.0
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Chapter 11: An Introduction to Hotel Valuation
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Sample Questions
Q1) 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
Q2) If a hotel has the highest average rate in the market it
A)is the rate leader in the market.
B)usually has a high occupancy as well.
C)has a high Revpar.
D)is making a lot of money.
Q3) When you have a fee simple interest in a property, which of the following do you NOT own?
A)the minerals under the ground
B)the air space above the ground
C)the ground and everything permanently attached to it
D)none of the above
Q4) The best source for projecting operating expenses for a hotel is the financial statements of comparable hotels.
A)True
B)False
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Chapter 12: Capital Structure
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Sample Questions
Q1) 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.
Q2) Fixed cost sources of financing include both debt and common stock.
A)True
B)False
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) 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
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