Match the capltal inmtmant methods to their speciﬁc characterlstlc.
X Your answer is incorrect.
Your answers: Correct answers:
Payback penod an X Can reﬂect changes In level of Payback period an Slmplest method
risk over a project's life
A
Chapter 4: STATEMENT OF CASH FLOWS
It shows the effects of a business's operating, investing, and financing activities for the acct period. It
explains the change in cash for that period. Cash is defined to include both cash and cash equivalents.
Cash equ
Chapter 3: INCOME STATEMENT
Alco called statement of earnings and statement of operations, reports the success of the hospitality
property's ops for a period of time. May be prepared on a weekly or monthly basis for management and
quarterly or annually fo
Chapter 5: RATIO ANALYSIS
Users of financial statements need to be able to interpret the reported facts to discover things of the
hosp op's financial situation that could otherwise go unnoticed. This is accomplished through the RATIO
ANALISYS.
Ratio analy
Chapter 8: Cost Approaches to Pricing
A major determinant of a hospitality op's profitability is its prices. Mgmt's goal is to set prices that result
in profit maximization. Another factor when setting prices is the "positioning" of the op in the
marketpl
Chapter 7: Cost-Volume-Profit Analysis
Breakeven Point: the level of sales volume at which total revenues equal total costs.
Contribution Margin: sales less cost of sales for either an entire operating department or for a given
product; represents the amo
A company is considering several investment opportunities. The investments have been
evaluated using payback period and break-even time. Only one project will be chosen and time
value of money is Important. The company should choose the project which the:
The correct answer Is shown.
A company is considering an investment opportunity with a cost of $5,000 that will provide future cash
ﬂows of 3&000. The cash ﬂows for the investment for the next 4 years are: $1,000, $1,000, $2,000 and
$4,000. Assume a requi
A company has a hurdle rate of 12%. Using IRR as the evaluation method, determine which
projects should be accepted.
V Your answer Is partially correct.
Relect Accept
Project A with IRR of 11.5% J Prclect C with IRR of 12.0% |
x Project E wlth IRR of12.
Whlch of the following are correct statements about the internal rate of return? [Check all that
apply.)
laud humus
V Your answer is partially correct. a
I Abcconem
«The higher the IRR, the better.
X IRR is explained In dollars.
V IRR reflects the time
If a company uses straight-line depreciation, the annual average investment can be calculated
as: (Check all that apply.)
Ilud Multili-
x Sorry. your answer Is Incorrect. I
Mieeedl
«(sum of annual average book valuesJ/asset's Ilfe.
Missecll
«(beginning
Limitations of the payback period as a capital budgeting evaluation method include that it
(Check all that apply.)
Hold bout“!
V Your answer is partlally correct. I
considers income rather than cash flows.
3‘
V Ignores cash flows after the payback perlo