Financial Management & Budgeting Flashcards

A hotel's average daily rate (ADR) increased from $100 to $110 while occupancy fell from 80% to 75%. Which metric would best show the combined impact?

Answer: RevPAR

RevPAR (Revenue Per Available Room) combines both ADR and occupancy into a single performance metric.

Accounts receivable turnover in hospitality measures:

Answer: How many times receivables are collected per year

Accounts receivable turnover = net credit sales ÷ average accounts receivable, indicating how efficiently the hotel collects credit-based revenue.

What does a 'bottom-up' budget approach involve?

Answer: Department heads build their budgets, which are consolidated upward

In bottom-up budgeting, individual department managers build their own budget estimates, which are then aggregated at higher levels.

A food and beverage outlet has sales of $300,000, cost of goods sold of $90,000, and labor of $120,000. What is the prime cost percentage?

Answer: 70%

Prime cost = COGS + labor = $90,000 + $120,000 = $210,000; prime cost % = $210,000 ÷ $300,000 = 70%.

Which internal control best reduces the risk of employee theft at a hotel's front desk cash drawer?

Answer: Assigning each cashier a separate, individual cash bank

Individual cash banks ensure accountability by linking shortages or overages directly to a specific cashier.

Depreciation in hotel accounting serves primarily to:

Answer: Allocate the cost of long-term assets over their useful life

Depreciation systematically allocates the cost of tangible fixed assets over their estimated useful lives as a non-cash expense.

A hotel's current ratio is 0.8. This indicates the hotel:

Answer: May struggle to meet short-term financial obligations

A current ratio below 1.0 means current liabilities exceed current assets, signaling potential short-term liquidity problems.