Intro to Finance for Hospitality Management

 Intro to Finance for Hospitality Management



AnswersQuestions
income statementMost analysts start their analysis of financial statements with the
TRUEEstimations have to be made in an adequate manner which increases earning capacity of enterprise.
TRUEThe finance manager has to decide to allocate funds into profitable ventures so that there is safety on investment and regular returns is possible.
Peak and weak seasonscause the fluctuation in tourists and visitor numbers to a destination. This is the reason, sometimes hoteliers need to change or completely revamp their room pricing strategies to earn a profit.
break‐even pointrepresents the level of sales where net income equals zero.
Pricing based on your repeat guestsYou can email to all your guests with some discount on vacation tours or offers to stay for 2 nights with a lower rate package on their birthdays/anniversaries on booking directly with the hotel.
vertical" analysisThe correct answer is: With this method of analysis of financial statements, we will look up and down the income statement to see how every line item compares to revenue, as a percentage.
TRUEYou can encourage guests to pay slightly more for a better room () with better facilities.
TRUEmeasures how well a company performs in generating a profit. Click the following links for a thorough review of each ratio.
contribution margin ratioit is calculated by dividing the contribution margin by the sales or revenues amount.
TRUEIn the ever-evolving global economy, the key to an effective revenue management strategy is to adopt a systematic approach to pricing.
TRUECash Equivalents are also lumped under this line item and include assets that have short-term maturities under three months or assets that the company can liquidate on short notice,
DelphiThis method was invented by Olaf Helmer and Norman Dalkey of the Rand Corporation in the 1950s for the purpose of addressing a specific military problem.
Cash Flow Statementshows how much cash is generated and used during a given time period
Cross-sellinghas now become popular and excites customers to make additional purchases apart from the one they already booked in advance.
TRUEinvolves short- term and long- term debt equity analysis.
current liabilitiesare all the debts and expenses the company expects to pay within a year or one business cycle, whichever is less.
FALSECheck is required for many purposes like payment of wages and salaries, payment of electricity and water bills, payment to creditors, meeting current liabilities, maintainance of enough stock, purchase of raw materials, etc.
Leverage ratiosThese ratios reveal the extent to which a company is relying upon debt to fund its operations, and its ability to pay back the debt. Click the following links for a thorough review of each ratio.
disaggregate market modelsseparating off different segments of a complex market for individual study and consideration
TRUEA finance manager has to make estimation with regards to capital requirements of the company.
TRUEEstimations have to be made in an adequate manner which increases earning capacity of enterprise.
Rate of Return MethodIn this method, average annual net income (after tax and depreciation deductions) is expressed as percentage of capital investment.
Assess the quality of the firm's financial statements.There are generally six steps to developing an effective analysis of financial statements. The third step is:
TRUEif you don't want to lose your customers and competition in the market, it is necessary to set a pricing strategy to increase overall profitability of the business.
TRUEWorking capital is also known as net working capital (NWC)
quantitative method of forecastingThis a mathematical process, making it consistent and objective
Activity ratiosThese ratios are a strong indicator of the quality of management, since they reveal how well management is utilizing company resources. Click the following links for a thorough review of each ratio.
segmentsTo build an effective , it is necessary to understand the different market .
Pricing based on the upsellingIn this, you can offer the "upgrade" options to the guests while they're making a choice of a hotel room.
Return Of InvestmentsWhenever there is a demand, you can increase your room rates for more business ROI. ROI stands for:
Cost-volume-profit (CVP) analysisis used to determine how changes in costs and volume affect a company's operating income and net income.
causal modelis the most sophisticated kind of forecasting tool. It expresses mathematically the relevant causal relationships, and may include pipeline considerations (i.e., inventories) and market survey information.
horizontal analysisWith this analysis , we look across the income statement at the year-over-year (YoY) change in each line item.
FALSETo attract repeat guests and earn revenue through them, you dont need to apply a proper pricing strategy.
minusThe standard formula for working capital is current assets current liabilities.
Present Worth MethodThis method is more accurate and reasonable and is used to evaluate the present value of new equipment.
Machinery and Allied Products InstituteThis is a new method and was developed by George Teborgh, the director of this institute.
Know your target audienceOne of the steps which are necessary to consider to create a proper pricing strategy for your hotel is
contribution marginrepresents the amount of income or profit the company made before deducting its fixed costs
TRUEUnidentifiable intangible assets include brand and goodwill.
TRUEA finance manager has to make estimation with regards to capital requirements of the company.
TRUEinvolves short- term and long- term debt equity analysis.
TRUEProperty, Plant, and Equipment (also known as PP&E) capture the company's tangible fixed assets.
FALSEHorizontal analysis looks at the vertical affects line items have on other parts of the business and also the business's proportions.
Seasonal subseries plotsalternative plot that emphasises the seasonal patterns is where the data for each season are collected together in separate mini time plots.
TRUEFinancial Management means applying general management principles to financial resources of the enterprise.
shareholders' equityThe balance sheet is a report of a company's financial worth in terms of book value. It is broken into three parts to include a company's assets, liabilities and .
product differences measurement.compare a proposed product with competitors' present and planned products, ranking it on quantitative scales for different factors.
sales incomeWhich of the following is not the main liquidity ratios for a business?
TRUEThe net profits decision have to be made by the finance manager.
current ratiocurrent assets divided by current liabilities
Pricing based on the non-refundable policyYou can offer a lower rate for a longer stay with a condition of no refund in case of cancellation (this will help you sell the room again if canceled).
Payback PeriodThis technique determines as to how long it will take (in years) to payback invested capital.
seasonal patternoccurs when a time series is affected by seasonal factors such as the time of the year or the day of the week.
Occupancy basedThis pricing strategy is the best way if you want to increase room revenue. You can set the pricing of your hotel rooms based on the demand and supply.
projectedThe financial statements of a company record important financial data on every aspect of a business's activities. As such they can be evaluated on the basis of past, current, and performance.
TRUEInventory includes amounts for raw materials, work-in-progress goods,and finished goods.
liquidityWorking capital is a measure of a company's ________________, operational efficiency and its short-term financial health.
revenueThough it is surprising, a well-planned non-refundable cancellation policy can help you increase your .
FALSEAccounts Receivables, is the amount a company owes suppliers for items or services purchased on credit.
Cost controlIt is the practice of identifying and reducing business expenses to increase profits, and it starts with the process.
exponential smoothing methodsare weighted averages of past observations, with the weights decaying exponentially as the observations get older.
TRUEAll PP&E is depreciable except for Land.
FALSECheck is required for many purposes like payment of wages and salaries, payment of electricity and water bills, payment to creditors, meeting current liabilities, maintainance of enough stock, purchase of raw materials,etc.
TRUEInventory includes amounts for raw materials, work-in-progress goods, and finished goods.
TRUEThis account includes the balance of all sales revenue still on credit, net of any allowances for doubtful accounts (which generates a bad debt expense). As companies recover accounts receivables, this account decreases and cash increases by the same amount
FALSEMarketing manager has to make decisions with regards to cash management.
Upsellingis beneficial during the booking process. In this, you can offer the "upgrade" options to the guests while they're making a choice of a hotel room.
qualitative forecastingOtherwise known as the judgmental method, offers subjective results, as it is comprised of personal judgments by experts or forecasters.
Pricing based on the market competitionyou constantly need to monitor your competitors' room rates and understand their pricing strategy
Pricing based on your guest typeYou can sell the same room at a different price for different guests.
guests are offered one simple rate for their entire stay based on their arrival date and total reservation night length.An advantage of the length of stay pricing is that:
TRUEFinancial Management means planning, organizing, directing and controlling the financial activities such as procurement and utilization of funds of the enterprise.
CreditorsAnyone who has lent funds to a company is interested in its ability to pay back the debt, and so will focus on various measures.
FALSEMarketing manager has to make decisions with regards to cash management.
TRUEDividend declaration includes identifying the rate of dividends and other benefits like bonus.
primary sourcestakes time to gather because it is first-hand information, also considered the most reliable and trustworthy sort of information.
FALSEAccounts Receivables, is the amount a company owes suppliers for items or services purchased on credit.
TRUEThe finance manager has to decide to allocate funds into profitable ventures so that there is safety on investment and regular returns is possible.
TRUEFinancial statement analysis is used by internal and external stakeholders to evaluate business performance and value.
target net incomeSales - fixed costs - variable costs =
ratio analysisSeveral techniques are commonly used as part of financial statement analysis. Three of the most important techniques include , , and .
cycle occurswhen the data exhibit rises and falls that are not of a fixed frequency.
FALSELiabilities is most liquid of all assets, cash, appears on the first line of the balance sheet.
TRUEThis line item is noted net of depreciation. Some companies will class out their PP&E by the different types of assets, such as Land, Building, and various types of Equipment.
Occupancy based pricing strategyis the best way if you want to increase room revenue. You can set the pricing of your hotel rooms based on the demand and supply.
TRUEThis account includes the balance of all sales revenue still on credit, net of any allowances for doubtful accounts (which generates a bad debt expense). As companies recover accounts receivables, this account decreases and cash increases by the same amount
balance sheetdisplays the company's total assets, and how these assets are financed, through either debt or equity
Working capitalIt represents a company's ability to pay its current liabilities with its current assets.
Forecastingrefers to the practice of predicting what will happen in the future by taking into consideration events in the past and present.
FALSEA company has negative working capital If the ratio of current assets to liabilities is higher than one.
Forecasting by analogyA common example is the pricing of a house through an appraisal process. An appraiser estimates the market value of a house by comparing it to similar properties that have sold in the area.
current ratioWorking capital is calculated by using the, which is current assets divided by current liabilities
time seriesis a set of chronologically ordered points of raw data
Pricing based on forecastingis an important factor to consider for setting the price of the rooms that are available for future dates
TRUEAll PP&E is depreciable except for Land.
Budgetinginvolves creating a statement that consists of numerous financial activities of a company for a specific period, such as projected revenue, expenses, cash flow, and investments
TRUEDuring the peak season, if your 7 to 8 rooms are still unoccupied, you can increase the room rates of the same for more business profit.
Liquidity ratiosThis is the most fundamentally important set of ratios, because they measure the ability of a company to remain in business.
Pricing based on the cross-sellingexcites customers to make additional purchases apart from the one they already booked in advance
Financial statement analysisis the process of analyzing a company's financial statement for decision-making purposes.
seasonal plotis similar to a time plot except that the data are plotted against the individual "seasons" in which the data were observed.
lawsset regulations on hotels' activities because of which hotel room pricing is affected, leading to the controlling of prices at minimum or maximum levels
Working capitalassesses a company's ability to pay its current liabilities
TRUEAccounts Payable may or may not be lumped together with the above account, Current Debt. While they may seem similar, the current portion of long-term debt is specifically the portion due within this year of a piece of debt that has a maturity of more than one year
Current AssetsThis is what a company currently owns—both tangible and intangible—that it can easily turn into cash within one year or one business cycle, whichever is less.
income statementhow much revenue does it have, is it profitable, what are the margins like?"
FALSEAccounts Receivables may or may not be lumped together with the above account, Current Debt.
TRUEUnidentifiable intangible assets include brand and goodwill.
Regulate the forecastThis involves looking at different forecasts in the past and comparing them with the actual things that happened with the business.
TRUEProperty, Plant, and Equipment (also known as PP&E) capture the company's tangible fixed assets.
TRUEFor any financial professional, it is important to know how to effectively analyze the financial statements of a firm.
TRUEThe net profits decision have to be made by the finance manager.
TRUEFinancial Management means planning, organizing, directing and controlling the financial activities such as procurement and utilization of funds of the enterprise.
TRUEFinancial Management means applying general management principles to financial resources of the enterprise.
TRUECash Equivalents are also lumped under this line item and include assets that have short-term maturities under three months or assets that the company can liquidate on short notice,
Costincludes raw materials, selling and distribution overheads, cost of advertisement and sales promotion
TRUEIf there is no demand for the service or hotel room, it cannot be sold at all. However, different guest segments may react in a different way to price changes.
trendexists when there is a long-term increase or decrease in the data.
Current AssetsThis is what a company currently owns—both tangible and intangible—that it can easily turn into cash within one year or one business cycle whichever is less.
Current LiabilitiesThis typically includes all the normal costs of running the business such as rent, utilities, materials and supplies; interest or principal payments on debt