Finance Final

market

A _____ study provides info on the local economy, evaluates the location of the project, researches supply and demand, and presents projected operating results

True

A zero balance account is a service whereby the balances of a business' cash accounts are consolidated into a single account, but separate checking statements are provided

C. It provides a clear career path for its employees

Employees are affected by steady company growth because

True

Horizontal analysis analyzes the change in dollar and percentage amounts on both the income statement and balance sheet

B. a long amortization period

If you are the borrower, which of the following would you prefer?

D. The portion of your debt service payment that reduce the amount of money you owe to the lender

Principal repayment is

A. dividing net income by the amount invested

Return on equity is calculated by

A. by dividing cash flow by the market cap rate to arrive at the asset's approximate market value.

The cap rate approach to value is calculated

A. Risk

The higher the ____ the future earnings may not be achieved, the higher the return on investment investors demand

B. the higher your debt to equity ratio becomes

The more debt you borrow

B. Earnings per share, the company's stock multiple, and the market price of its common stock

The primary goals of a public company are to increase

B. presents when, and from whom, the capital is coming from, how and when you intend to spend it, and how and when you intend to pay the money back.

The source and use of funds statement

principal

When talking about a loan, ____, is the amount of money borrowed

D. Amortization rate

Which of the following is of least interest to a lender when analyzing a loan request?

C. Construction

A ______ loan is a one to two year interest only loan used to build, expand, acquire, or renovate a physical facility

True

All credit card companies charge merchants a credit card transaction fee

False

All credit card sales are treated as cash sales, with the cash payments being deposited in the business' bank account each day

B. 100% equity

An un-leveraged return on investment assumes

B. decreases

As you increase the discount rate in calculating the present value of a potential investment, the present value of the potential investment:

A. 9.0%

At what interest rate would $1,000 grow to $5,600 in 20 years?

B. 70.0%

Calculate the LTV ratio if a project is valued at $1,000,000 and the borrower is seeking a $700,000 loan.

True

Cash is the most important asset a business can have

B. Large quantities of new capital to finance the growth

Growth through expansion of physical facilities requires

True

Having a very high current ratio, such as 6.7 indicates that a company has too many dollars worth of current assets that are not earning a return on investment

c. 14

How many years would you need to receive $1,000 to be worth $10,000 today assuming a 5% discount rate?

D. 12.5%

If 75% of a developer's capital is debt and his interest expense is 10% and 25% of his capital is equity at a 20% hurdle rate, what is his WACC?

B. 55.5%

If a company takes out a loan of $400,000 for a $900,000 project, what is the weight of debt for this project?

B. A current balance sheet and prior year tax returns

If a guarantor is required for a loan the must provide

B. not make the investment

If an investor is offered an opportunity to acquire an existing hotel for $10 million and he calculates its future value to be $15 million in 10 years and its present value to be $9 million, he would likely:

True

Labor cost percentage is an example of operating ratio

True

Managers utilize financial statements to compare actual results with the budget for the period, the prior year, competitors, and industry norms

B. The present value of a cash flowing asset based on its projected future cash flow

Market value is

D. subtracting its initial cost from its present value

Net present value is calculated by

D. They view the company as on that can provide a more lucrative career

New employees are attracted to growth companies because

True

The Cp^3 system consists of a monthly commitment budget, purchase order system, daily payroll system, and daily profit and loss statement

A. principal, term, interest

The ____ is the amount of money you borrow, ____ means the number of months of years you are given to repay the loan, and _____ is the amount you pay to the lender

False

The daily payroll report summarizes revenues earned by each department within an operation

B. Dividing projected annual cash flow by the amount of annual debt service

The debt service coverage ratio is calculated by

True

The last line on the income statement, often referred to as the bottom line is net income

B. Multiple

The relationship between EPS and the current market price of a company's stock is referred to as its

D. developer, architect, interior designer

The resumes of which of the following people would be included in the investment package?

C. The lower the asset's present value

The riskier the investment

B. is the estimated price for which the asset could be sold at the end of the analysis period.

The terminal selling price

True

The three best known systems of accounts used in the hospitality industry are the systems for lodging, foodservice, and club mgmt.

capital

Three important components of investment analysis are the weighted average cost of capital, the discount rate, and the ___ method of valuation

A. cash, land, and leases

Types of equity include

B. debt and equity

What are the two types of capital?

D. $31,772

What is the approximate future value of $1,000 to be received each year for 15 years assuming an interest rate of 10%?

C. $40

What is the approximate present value of $100 to be received at the end of 5 years assuming a 20% discount rate?

A. $20,541

What is the debt service payment on a loan with the following terms?

D. risk of contract being terminated

What is the major disadvantage of growing through management contracts?

D. $920,000

What is the max amount of money that can be borrowed given the following terms?

C. $15,625

What is the present value of the following stream of cash flow to be received at the end of each year assuming a discount rate of 20%?

D. The Tax Reform act of 1986

What law brought new real estate development to a screeching halt in the 1980s?

C. third party confirmation

What part of the investment package includes a report from a well-known reputable consulting firm affirming the feasibility of the project?

D. Mixed-use development

What type of development features a mixture of hotels, residential condominiums, entertainment venues, health club facilities, and upscale retail space?

C. a $2,000 investment that provides $500 per year for 10 years

Which of the following investments yields the highest IRR using a 15% discount rate?

C. a fixed payment that is a combination of interest and principal repayment

Which of the following is the best description of debt service?

B. pre-opening expenses

Which of the following would be considered soft costs in the project budget?

True

Working capital refers to the amount of cash required to operate a business

False

the goal of financial accounting is to provide more timely operating results related to revenues and expenses to help mgmt. maximize the operating performance of the business

False

the menu abstract is an excellent tool to use when developing revenue management guidelines