New User Special Price Expires in

Let's log you in.

Sign in with Facebook


Don't have a StudySoup account? Create one here!


Create a StudySoup account

Be part of our community, it's free to join!

Sign up with Facebook


Create your account
By creating an account you agree to StudySoup's terms and conditions and privacy policy

Already have a StudySoup account? Login here

HTM 241 exam 1

by: Alicia Yan

HTM 241 exam 1 HTM 241

Marketplace > Purdue University > HTM 241 > HTM 241 exam 1
Alicia Yan
GPA 3.6

Almost Ready


These notes were just uploaded, and will be ready to view shortly.

Purchase these notes here, or revisit this page.

Either way, we'll remind you when they're ready :)

Preview These Notes for FREE

Get a free preview of these Notes, just enter your email below.

Unlock Preview
Unlock Preview

Preview these materials now for free

Why put in your email? Get access to more of this material and other relevant free materials for your school

View Preview

About this Document

Exam study guide for HTM 241 exam 1
Study Guide
50 ?




Popular in

Popular in Department

This 8 page Study Guide was uploaded by Alicia Yan on Monday February 23, 2015. The Study Guide belongs to HTM 241 at Purdue University taught by in Spring2015. Since its upload, it has received 560 views.


Reviews for HTM 241 exam 1


Report this Material


What is Karma?


Karma is the currency of StudySoup.

You can buy or earn more Karma at anytime and redeem it for class notes, study guides, flashcards, and more!

Date Created: 02/23/15
HTM 241 Exam topics Chapter 1 1 Why does a business need accounting I To record all monetary in ows and out ows from operating activities I To show the status of asset resources creditor liabilities and ownership equities of the business I Internally evaluate the effectiveness of operations I Externally communicate information to government agencies stockholders creditors 2 Unique characteristics of the hospitality industry I Diversified operations I Seasonality I Short or no lead time between production and consumption of service or goods I Labor intensive amp inefficiency I Fixed assets intensive 3 What are the differences between managerial accounting and financial accounting 4 What are the GAAP principles What do they mean I Generally Accepted Accounting Principles Business entity assumption Going concern assumption Cost principle Revenue recognition principle Matching principle VVVVV 5 Comparison between GAAP and IFRS 6 What are the differences between cash and accrual accounting I Cash accounting gt Recognizes revenue and expenses only when cash changes hands gt Mostly used by small business gt Beginning cash cash sales revenue cash payment ending cash I Accrual accounting gt Recognizes revenue and expense for sales when transactions happen gt For medium and larger business gt A more accurate picture of the real situation 7 Benefits of accrual accounting I Allows companies to recognize revenue and expenses as they are incurred and it will tell your company how well it is performing 8 What is depreciation I A systematic expensing of the cost of a longlived physical asset 9 How to find book value I Book valuehistorical cost accumulated depreciation Book value market value 10 Calculation and comparison of depreciation methods I Straightline Cost Residual useful lifetime depreciation expense per period I MARCS modified accelerated cost recovery system 11 Should we depreciate an idle property Continue to claim a deduction for depreciation on property used in your business or for the production of income even if it is temporarily idle not in use Chapter 2 1 The structure and organization 6 g basic categories accounts included order of accounts of income statement and balance sheet 2 Balance sheet equation and income statement equation I Balance Sheet Asset Liability OE I Income Statement Revenue cost amp expense operating incomeinterest amptax net income 3 What are the differences between balance sheet and income statement I Balance Sheet gt A Snapshot of the nancial condition gt A particular date gt The composition of the assets resources liabilities and ownership gt Presentations of different operations are similar I Income Statement gt Describes the operating activities gt Over an operating period the date indicated is the end of the period gt Presentations different from one to another to re ect operating results Department branch organization Dictated by the management needs 4 What are the main connections between income statement and balance sheet I When Rev gt Expense profits are generated net income gt Retained earnings T gt Ownership Equity T Definition of accounts 6 Cost of sales versus operating expenses U 7 Limitations of balance sheet I Not re ecting the current value of some assets I Not showing some elements valuable to hospitality operations I Not exact I Shows financial status for one moment 8 The purposes of inventory control I Preventing inventory shortage I Preventing excess inventory 9 Cost of sales equation Beginning inventory purchase ending inventory 10 Compare the two inventory control methods periodic and perpetual I Periodic method gt Actual physical count weekly gt Cost estimated monthly FIFO LIFO Weighted Average gt Inventory on any particular day cannot be known gt Mainly for low cost items I Perpetual method gt Continuous updating gt Requires a number of records receipt and sales gt A running balance Specific Identification Method gt For expensive items 11 Inventory valuation based on periodic inventory control a FIFO I Usually used for perishable items I Used by restaurants to ensure that inventory is sold before it spoils b LIFO I IFRS doesn t accept LIFO c Weighted average I Weighted average cost per unit Total cost of inventory available total units available 12 Comparing the cost of sales of the three inventory control methods 13 How do FIFO and LIFO in uence cost of sales during in ation periods I FIFO gt Lower cost of sales gt Higher ending inventory value I LIFO gt Increase in cost of sales gt reduce gross margin gt Higher cost of sales gt Result lower ending inventory value I Benefits of using LIFO during in ation period gt Matching higher costs with higher revenues gt Lower taxable operating income and lower tax Chapter 3 1 What are the goals of investors creditors and managers Why do investors and creditors have con icts of interest I Investors gt Maximizing investment return gt Current amp future earnings potential of receiving dividends I Creditors gt Safe repayment of loan principle and interest gt Current amp future ability to meet debt obligations gt Priority claims on company assets I Managers gt Maximizing stockholder s value While addressing creditor s concerns gt Operations efficiency amp profitability 2 What are the objectives of comparative and commonsize analysis I Comparative analysis Vertical gt Express each individual item as a percentage of total assets or revenue Total assets All balance sheet accounts Total sales revenue All income statement accounts I Commonsize analysis Horizontal gt To present changes in the nancial amp operational condition from one period to the next period gt Requires at least two successive nancial statements change Period 2 Period 1 absolute change change change Period 1 relative change Perform comparative and commonsize analysis for balance sheet and income statement 4 Interpretation of analysis results 9 5 Average check vs revenue I Average check revenue of guests I Banquet Higher price but less customers gt lower revenue I Average check and revenue are not necessary in same direction 6 Perform trend analysis trend percentage and trend index I Examining the results over multiple periods to find the direction a business is heading gt Trend periodt periodt1 period The change in the 1st period is 0 Comparison to the previous period gt Trend index periodt periodl x 100 Set the 1st period to 100 Scale subsequent periods based on the 1st period 7 What is the difference between trend percentage and trend index 8 Convert historical dollar into current dollar I CurrentHistoricalcurrent indexHistorical index Chapter 4 1 Benefits of ratio analysis I Comparing the firms of different sizes I An evaluation of balance sheet items in conjunction with income statement items Extract more information Make financial and operating data more meaningful 2 Five categories of ratios Liquidity ratios gt VV VV Indicates a company s ability to meet its shortterm obligations for the repayment of debt without difficulty Current ratio Current Assets Current Liabilities Quick ratio Quick Assets Current Liabilities Quick assets Cash Receivables Marketable securities Creditors prefer high or increasing liquidity ratios both before and after the loan Investors like to see lower liquidity ratios but not too low Window dressing Reducing current assets and current liabilities at the same time Use cash to pay accounts payable Only temporarily improvement Working capital does not change Working capital current asset current liability The amount of money that investors have to put in the company to buy current assets Current ratio1 gt WC0 Current ratiolt1 gt WClt0 Lower WCgt Lower current ratios Higher WC gt higher current ratio I Solvency ratios gt gt Measure a company s ability to meet its longterm obligations and avoid bankruptcy Insolvency Liabilities gt assets and cash ows gt Not able to pay the bills and other obligations on time Total liabilities to total assets ratio Total liability Total assets ex 765l9730781 For each 1 asset have 078 is liability Total liabilities to total stockholders equity ratio Total liability Total equity ex 450l2901551 For each 1 stockholder have invested the creditors have invested 155 Number of times interest earned EBIT interest expense EBIT interest expense ex 30012025 gt gt 2 timesgtcan safety pay the interest lt 2 timesgt can t safety pay the interest Common characteristics for DebtAsset amp DebtEquity High ratio gt higher risk for creditors gt more difficult to borrow money gt higher interest Creditors like low ratios Equity owners like high ratios financial leverage Profitability ratios gt gt Management s effectiveness in producing profits Pro t margin Net income Sales revenue Overall effectiveness in generating sales and controlling expenses at Gross Margin ROA Return On Assets Net income Average total assets As a benchmark to evaluate the purchase of new assets Effectiveness in using assets to generate profit ROE Return On Equity Net income Average stockholders equity To evaluate Investment decisions Effectiveness in using equity to generate profit Important for investors Financial leverage Debt Assets High leverage company Pay more interest Pay less tax Higher ROE Activity Turnover ratios gt gt Measuring management s ef ciency in managing operations Receivable related ratios Showing managers efficiency in managing and collecting accounts receivable Use average receivable for the period beginning receivable ending receivable 2 O Receivable percentage Average receivable credit sales or total revenue 0 Receivable turnover ratio Credit sales or revenue Average receivable The average number of times the company is paid 0 Receivable average collection period Days in the period Receivable turnover ratio The average number of days the company is paid Inventory related ratios 0 Inventory turnover ratio Cost of sales Average inventory The number of times the inventory has to be replenished More times gt Inventory is moving quicker 0 Inventory holding period Operating days Inventory turnover ratio Days to consume the inventory Food and beverage inventories are calculated separately Working capital turnover 0 Working capital turnover Total sales revenue Average working capital High WC Ineffective use of funds Low WC Liquidity problem if sales decline Fixed asset turnover 0 Fixed asset turnover Total revenue Average xed assets The revenue generated by every 1 of fixed assets Hospitality operating ratios FampB Lodging gt gt Operating efficiency FampB Ratios Food cost Food cost of sale Food Revenue Labor cost Labor costs Total sales revenue Labor cost Salaries Wages Benefits Average Check Revenue Guests Average Seat Turnover Guests Seats Average Revenue per EmployeeAverage reV of employees of Guests served per Employee of guests of employees gt Lodging ratio Occupancy rate of rooms sold of rooms available ADR revenue of rooms sold RevPar revenue of rooms available Occup Rate X ADR Double occupancy rate of double occupied rooms of rooms sold 3 Calculate and interpret all ratios a Ask yourself if the increase of a certain ratio is good or bad b Especially the turnover ratios for accounts receivable inventory working capital 4 What are the differences between current ratio and quick ratio Quick ratio is always smaller 5 Investor and creditor s preference on the levels of liquidity and solvency ratios I Creditors like low solvency ratios debtasset ampdebtequity I Creditors prefer high or increasing liquidity ratios CACL I Equity owners like high solvency ratios financial leverage I Investors like to see lower liquidity ratios 6 What is the relationship between working capital and current ratio I WC CA CL 7 What are the ways to improve current ratio I Reducing current liabilities I Increasing current assets without increasing CL 8 What is window dressing I Window dressing Reducing current assets and current liabilities at the same time Use cash to pay accounts payable Only temporarily improvement Working capital does not change 9 Why do we need to use AVERAGE accounts receivable for calculating receivable ratios I Use average receivable for the period 10 What is the difference between liquidity and solvency ratios I Liquidity ratios Indicates a company s ability to meet its shortterm obligations for the repayment of debt without difficulty I Solvency ratios Measure a company s ability to meet its longterm obligations and avoid bankruptcy 11 What is the difference between ROA and ROE I ROA Effectiveness in using assets to generate profit I ROE Effectiveness in using equity to generate profit 12 What is financial leverage I Using debt to magnify investor s return ROE 13 What is working capital I Working capitol Current Assets Current Liaility 14 Two implications of negative working capital I Not able to meet shortterm debt obligations I Managerial ef ciency 15 What are hotel and restaurant operating ratios 16 The relationship between ADR occupancy and Reva I RevPar revenue of rooms available Occup Rate x ADR


Buy Material

Are you sure you want to buy this material for

50 Karma

Buy Material

BOOM! Enjoy Your Free Notes!

We've added these Notes to your profile, click here to view them now.


You're already Subscribed!

Looks like you've already subscribed to StudySoup, you won't need to purchase another subscription to get this material. To access this material simply click 'View Full Document'

Why people love StudySoup

Steve Martinelli UC Los Angeles

"There's no way I would have passed my Organic Chemistry class this semester without the notes and study guides I got from StudySoup."

Amaris Trozzo George Washington University

"I made $350 in just two days after posting my first study guide."

Steve Martinelli UC Los Angeles

"There's no way I would have passed my Organic Chemistry class this semester without the notes and study guides I got from StudySoup."

Parker Thompson 500 Startups

"It's a great way for students to improve their educational experience and it seemed like a product that everybody wants, so all the people participating are winning."

Become an Elite Notetaker and start selling your notes online!

Refund Policy


All subscriptions to StudySoup are paid in full at the time of subscribing. To change your credit card information or to cancel your subscription, go to "Edit Settings". All credit card information will be available there. If you should decide to cancel your subscription, it will continue to be valid until the next payment period, as all payments for the current period were made in advance. For special circumstances, please email


StudySoup has more than 1 million course-specific study resources to help students study smarter. If you’re having trouble finding what you’re looking for, our customer support team can help you find what you need! Feel free to contact them here:

Recurring Subscriptions: If you have canceled your recurring subscription on the day of renewal and have not downloaded any documents, you may request a refund by submitting an email to

Satisfaction Guarantee: If you’re not satisfied with your subscription, you can contact us for further help. Contact must be made within 3 business days of your subscription purchase and your refund request will be subject for review.

Please Note: Refunds can never be provided more than 30 days after the initial purchase date regardless of your activity on the site.