Financial Management & Budgeting Flashcards

Which item is NOT deducted when calculating EBITDA?

Answer: Depreciation

EBITDA is earnings before interest, taxes, depreciation, and amortization, so depreciation is added back.

Your hotel's RevPAR is $90 and the competitive set's RevPAR is $100. What does your RevPAR Index (RGI) show?

Answer: 90, below fair share

RGI = ($90 / $100) x 100 = 90, meaning the hotel captures less than its fair share of revenue.

Which internal control practice best reduces the risk of cash theft at the front desk?

Answer: Separating duties so the person who handles cash does not record or reconcile it

Segregation of duties means one person can't both take cash and hide its loss in the records.

Housekeeping costs for the month totaled $45,000 across 3,000 occupied rooms. What is the cost per occupied room (CPOR)?

Answer: $15.00

CPOR = $45,000 / 3,000 occupied rooms = $15.

Hotels have high operating leverage. What does that mean for profits?

Answer: Small revenue changes cause proportionally larger swings in profit

Because most costs are fixed, revenue gains or losses flow heavily into profit.

An energy retrofit costs $120,000 and saves $30,000 a year. What is its simple payback period?

Answer: 4 years

Payback = initial investment / annual savings = $120,000 / $30,000 = 4 years.

What is a key advantage of bottom-up (participative) budgeting, where department heads prepare their own budgets?

Answer: Department managers buy in and are more accountable

Managers who help build the budget understand it better and feel more responsible for meeting it.