hospitality accounting exam 3
At the end of the year, retained earnings totaled $1,700. During the year, net income was $250, and dividends of $120 were declared and paid. Retained earnings at the beginning of the year totaled:
$1,570
The Heath Corporation reported net income for 2011 of $177,500. Heath began the year with 100,000 shares of $5 par value common shares outstanding and 2,500 shares of $100 par value 8% preferred shares outstanding. On October 1, Heath sold 10,000 shares of common stock for $6 per share. Heath paid dividends to the common shareholders in December. The basic earnings per share for 2011 is
$1.54 per share
Listed below are year-end account balances (in $ millions) taken from the records of Symphony Stores. What would Symphony report as total assets?
$2,303
The following information is provided: Dividends paid this year $ 30,000 Dividends declared this year 40,000 Net income this year 100,000 Retained earnings, start of year 150,000 The retained earnings at the end of this year are:
$210,000
The following is a portion of a comparative analysis: Cost of Sales This Year Change $400,000 (30,000)The cost of sales last year was:
$430,000
At the beginning of the fiscal year, the balance sheet showed assets of $1,364 and owners' equity of $836. During the year, assets increased $74 and liabilities decreased $38.Liabilities at the end of the year totaled:
$490
A hotel provides the following information for its year ended:Room Sales $2,575,440Food Sales $870,000Food Cost $295,800Statistical Data: 140 Rooms Available for Sale Paid Rooms Occupied: 35,770 Covers: 72,500 70 Tables, 252 ChairsThe average room rate was:
$72.00
At the beginning of the fiscal year, the balance sheet showed assets of $1,364 and owners' equity of $836. During the year, assets increased $74 and liabilities decreased $38.Owners' equity at the end of the year totaled:
$948
At the end of Year 1, the income statement for the Roadside Inn showed net income at $50,000. At the end of Year 2, the income statement showed $100,000 in net income. A horizontal analysis of the income statements would show the relative difference between the two years as:
100%
The Heath Corporation reported net income for 2011 of $177,500. Heath began the year with 100,000 shares of $5 par value common shares outstanding and 2,500 shares of $100 par value 8% preferred shares outstanding. On October 1, Heath sold 10,000 shares of common stock for $6 per share. Heath paid dividends to the common shareholders in December. The weighted average number of common shares used to compute earnings per share for 2011 is
102,500
A company had a market price of $83.12 per share, dividends per share of $5.40, and earnings per share of $4.87. Its price-earnings ratio is equal to:
17.07
A company had a market price of $37.50 per share, earnings per share of $1.25, and dividends per share of $0.40. Its price-earnings ratio is equal to:
30.0
A company had income of $180,000 in 2016 and $240,000 in 2017. The increase in net income from 2016 to 2017 is
33 percent
A hotel provides the following information for its year ended:Room Sales $2,575,440Food Sales $870,000Food Cost $295,800Statistical Data: 140 Rooms Available for Sale Paid Rooms Occupied: 35,770 Covers: 72,500 70 Tables, 252 ChairsThe occupancy percentage (stated as a whole number) was:
70%
Verbal or implied promises to pay at some short-term future date. Such transactions usually arise when food, beverages, supplies, services or utilities are purchased from vendors on credit.
Accounts Payable
The approach to preparing financial statements based on recognizing revenues when they are earned and matching expenses to those revenues is:
Accrual basis accounting
Any amounts received for issued stock in excess of the par value of the stock sold.
Additional Paid-in Capital
Which of the following would be found on a hotel's income statement under Undistributed Operating Expenses?
Administrative and General Expenses
Financial statement analysis involves forms of comparison including:
All of these answers are correct
If a company has a profit:
Assets will be equal to liabilities plus owners' equity.
How much, on average, any restaurant (or other food outlet) guest is spending.
Average Food Check ratio
Which of the following types of ratios represent the goals of management?
Budgeted Ratios
The system of preparing financial statements based on recognizing revenues when the cash is received and reporting expenses when the cash is paid is called:
Cash basis accounting.
Cash equivalents would not include:
Cash not available for current operations.
Pro forma earnings:
Could be considered management's view of permanent earnings.
Represent the amount due on Long-term Debt that will be paid within the next twelve months.
Current Maturities of Long-Term Debt
Owners' equity in a business increases as a result of which of the following?
Earnings from profitable operation of the business.
The costs of goods and services used in the process of creating revenue.
Expenses
A Balance Sheet is an accurate reflection of the true value of a company.
False
Horizontal analysis involves expressing each item in the financial statements as a percentage of an appropriate total, or base amount, within the same year.
False
Horizontal analysis is the comparison of a company's financial condition and performance to a base amount.
False
Horizontal analysis is used to reveal changes in the relative importance of each financial statement item.
False
Intangible assets usually are reported in the balance sheet as current assets.
False
Ratios express a direct relationship between two relevant items for a period; they are calculated by dividing one amount by another, both from different accounting periods.
False
Return on equity (ROE) is a function of three ratios: net profit margin, return on assets, and financial leverage.
False
Since everyone knows what an income statement is, there is no need to put a heading on this report.
False
The accounting profession assumes that financial statement users have an expert knowledge of business.
False
The profit margin ratio considers the asset base utilized to earn income.
False
Vertical analysis is the comparison of a company's financial condition and performance through time.
False
Ratios that measure operations efficiency include:
Food cost percentage and labor cost percentage
To appear in a balance sheet of a business entity, an asset need not
Have a ready market value.
Comparing the amount of a balance sheet item in one year to the amount for the same item in a prior year is called
Horizontal analysis
The study of an individual financial statement item over several accounting periods is called:
Horizontal analysis
The study of an individual item or account over several accounting periods, such as months, quarters or years is known as:
Horizontal analysis
Which of the following questions can not be answered by analyzing information presented on a monthly income statement?
How much cash was on hand at the end of the month?
Which of the following statements is correct?
If a business is to earn a net income, the gross profit on sales must be greater than operating expenses.
Financial statements are typically prepared in the following order:
Income statement, statement of retained earnings, balance sheet
Financial statements intended for internal users. These statements present detailed information on each responsibility area ant the hotel as a whole.
Internal Financial statements
Groups inside the hospitality business who require accounting and financial information. The groups include the board of directors, the general manager, department managers, and other staff.
Internal users
A ratio that shows how quickly the inventory is being used.
Inventory Turnover Ratio
Which of the following statements regarding financial statement preparation is false?
It makes sense to prepare the balance sheet first because it contains information needed on the income statement.
Which of the following sentences about the statement of retained earnings is true?
It may be combined with the income statement.
Obligations at the balance sheet date that are expected to be paid beyond the next twelve months.
Long-Term Liabilities
Owners' equity in a business decreases as a result of which of the following?
Losses from unprofitable operation of the business.
The broad principle that requires expenses to be reported in the same period as the revenues that were earned as a result of those expenses is the:
Matching Principle
The principle stating that all expenses must be recorded in the same accounting period as the revenue that they helped to generate.
Matching Principle
An amount that is similar to the Average Occupancy per room. It is determined by dividing the number of rooms occupied by more than one guest by the number of rooms occupied by guests
Multiple Occupancy
The excess of revenues earned over expenses for the accounting period.
Net Income
A ratio that measures actual sales revenue in relationship to the hotel's sales potential.
Occupancy Percentage ratio
Includes revenues and expenses directly related to the principal revenue-generating activities of the company.
Operating Income
Which of the following statements about liquidity ratios is true?
Owners and suppliers prefer a short accounts collection period for accounts receivable.
Refers to the percentage of rooms sold in relation to rooms available for sale in hotels and motels. In food service venues, it is commonly referred to as seat turnover and is calculated by dividing the number of people served by the number of seats available.
Paid Occupancy
A comparative financial statement:
Places two or more years of a financial statement side-by-side in order to compare results.
A ratio that is computed by dividing the market price per share by the EPS. This ratio is calculated for many companies and may vary significantly between entities.
Price-Earnings Ratio
Which ratio compares the earnings per share of a company to the market price for a share of the company's stock?
Price-earnings ratio
The distinction between operating and nonoperating income relates to:
Primary activities of the reporting entity.
A ratio that measures the number of day's inventory is on hand prior to sale.
Return on Days' Inventory on Hand ratio
A ratio that compares the profits of the hospitality enterprise to the owner's investment.
Return on Equity Ratio
Short for revenue per available room.
RevPAR
____________________________ is a measurement of industry success. It evaluates if the inventory of rooms is being most advantageously managed in relation to its maximum revenue potential. It is computed by dividing Rooms Revenue by Rooms Available for Sale.
RevPAR
The inflow of assets, the reduction of liabilities, or a combination of both resulting from the sale of goods or services would be reflected on an income statement as:
Revenues
The _________________________ details the movement of owners' equity over a period.
Statement of Changes in Stockholders' Equity
The balance sheet might also be called:
Statement of Financial Position.
Which of the following is not an example of an internal user of a company's financial statements?
Stockholder
Which of the following departments is not a support center?
Telecommunications
_______________________________ measures room sales in terms of the hotel's capacity to generate rooms sold. The percentage is calculated by dividing the Paid Rooms Occupied amount by the number of Rooms Available.
The Occupancy percentage
A broad principle that requires identifying the activities of a business with specific time periods such as months, quarters, or years is the:
Time period assumption
Stock that had previously been issued by the company that has been repurchased. It is classified as a contra-equity account
Treasury Stock
Horizontal analysis is also known as:
Trend analysis
A banker may perform a financial ratio analysis to assess a firm's ability to repay debt in a timely manner.
True
A vertical analysis uses percentages to compare each of the parts of an individual statement to the whole. For example, on an income statement each item would be shown as a percentage of net sales.
True
Accrued salaries and wages in a balance sheet represent salaries and wages that have been earned by employees but not yet paid.
True
Comparative horizontal analysis is used to reveal patterns in data covering successive periods.
True
Earnings per share (EPS) is affected by treasury stock transactions.
True
Financial ratios are expressions of logical relationships between certain items in one or more financial statements.
True
Financial statement analysis is the application of analytical tools to general-purpose financial statements and related data for making business decisions.
True
Financial statements show the financial condition of a business and the results of operations.
True
For internal users, one purpose of financial statement analysis is to provide information helpful in improving the company's efficiency and effectiveness in providing products and services.
True
Measures taken from a selected competitor or a group of competitors are often excellent standards of comparison for analysis.
True
Non-current assets include Notes Receivable, Investments, Property and Equipment, Land, and Intangible amounts (including such items and China, Glassware, and Silver).
True
Only one figure is used in the owner's equity section of the balance sheet if a statement of owner's equity has been prepared.
True
Ratios are a critical part of financial analysis because they point to potential benefits to be gained as well as potential problem areas.
True
Ratios can be expressed as a percent, rate, or proportion.
True
Some ratios are expressed as percentages, some are expressed on a per unit basis. Others are stated as a turnover of so many times, while some are expressed as a coverage of so many times.
True
Standards for comparison are necessary when making judgments about a company's financial performance.
True
The balance of net receivables represents the amount expected to be collected.
True
The formula for the net profit margin percentage is: Net profit margin percentage = Net income ÷ Sales.
True
Trend analysis is a form of horizontal analysis that can reveal patterns in data across successive periods.
True
An analysis procedure that uses percentages to compare each of the parts of an individual statement to a key dollar amount from the financial statements is:
Vertical analysis
Current assets include cash and all other assets expected to become cash or be consumed:
Within one year or one operating cycle, whichever is longer.
These ratios measure the effectiveness with which management uses the assets of a hospitality business. They are also called Asset Management Ratios.
activity ratios
According to the Uniform System of Accounts for the Lodging Industry, the expenses of a human resources department, when not accounted for as a separate department, are reported in the income statement as part of:
administrative and general.
If the P/E ratio of a company's common stock were 12, and its earnings were $2.50 per common share:
an increase in earnings of $0.20 per share, with no change in the multiple, would result in a market price increase of $2.40 per share.
Which of the following approaches to income statement analysis compares the income statements of several periods to figures from a single period?
base-year comparisons
Which of the following is generally the best standard against which to compare the results of ratio analysis?
budgeted ratio goals
Financial statement analysis is useful for:
evaluating a company's success in meeting the challenges that it faces.
An income statement with revenues of $6,000 and expenses of $8,000 would show a net profit of $2,000.
false
Ratios provide useful, stand-alone tools to assess management performance and improvement efforts.
false
Ratios relative to the income statement are used to measure profitability, activity, and management structure.
false
Since each firm is a unique entity, comparison of data for the firm with industry averages is of no use in financial analysis
false
Treasury Stock Ratios are used by investors to determine if they should buy, hold, or sell the stock of a hospitality enterprise.
false
The price/earnings ratio:
is a measure of the relative expensiveness of a firm's common stock.
A ratio that is calculated by dividing total labor costs by total revenue.
labor cost percentage ratio
A common-size income statement shows __________ as 100%.
net revenue
Which of the following are not among the typical standards used in ratio analysis?
official standards set by government regulations
Which of the following ratios is the best overall measure of management's performance?
operating efficiency ratio
RevPAR is the combination of:
paid occupancy percentage and average daily rate.
Which of the following ratios is popular with the investment community for evaluating whether a stock is reasonably priced?
price earnings ratio
Which of the following profitability ratios is calculated by dividing net income by total revenue?
profit margin
Limitations of ratio analysis the following items except:
ratios solve problems
Which of the following revenue centers does not have any payroll accounts?
rentals and other income
The accounting principle that requires revenue to be reported when earned is the:
revenue recognition principle
Trend analysis looks at
selected ratios over a period of time
The balance sheet of an entity:
shows amounts that are not adjusted for changes in the purchasing power of the dollar.
The Uniform System of Accounts for the Lodging Industry has been developed and revised by:
the Financial Accounting Standards Board.
A horizontal analysis of balance sheet data involves a comparison of a balance sheet amount on a given date with
the amount for the same balance sheet item on a pervious date
Financial reporting refers to:
the communication of relevant financial information to decision makers.
The purpose of the statement of retained earnings is to show:
the lifetime earnings retained by the corporation
A common technique for measuring earnings per share requires a company to compute the weighted average shares outstanding during the year.
true
A financial statement analysis report helps to reduce uncertainty in business decisions through a rigorous and sound evaluation.
true
A fiscal period is always a twelve-month period of time.
true
Financial analysis typically involves some form of comparison such as changes in the same item over a number of years.
true
Financial statements are usually prepared at the end of each fiscal period.
true
Liability and owner's equity accounts are credited with their opening balances.
true
Return on equity (ROE) provides insight with respect to a company's use of its assets.
true
The Labor Cost percentage is used as a measure of operating efficiency and provides the labor cost on each sales dollar.
true
The income statement covers a period of time, rather than a specific date.
true
The proper way to express the various ratios used in ratio analysis depends entirely on the particular ratio and the nature of the significant relationship it expresses between the two facts it relates.
true
