Shareholder value for a private company is the current market price of its common stock multiplied by the number of shares of common stock outstanding.
False
The more capital a company requires for growth, the quicker the growth rate.
False
Steady, sustained growth in the number of properties a company owns or manages provides clear career paths for its employees.
True
To increase profits, a higher sales volume can be achieved by either raising the price of products or by selling more products.
True
When a company's shares are diluted, that means earnings per share have been reduced.
True
______________ the business of your company is essential to its long-term success.
Growing
The primary goal of management is to increase ______________value.
Shareholder
A popular growth strategy is to generate more sales volume with the same number of assets while maintaining the business's current ______________margin.
profit
______________ involves selling the rights to a company's brand in a specific location or market for a stated number of years.
Franchising
The ultimate growth strategy is to take part in an initial ______________offering of its stock.
public
The greater the perceived risk, the less amount of equity a lender will require a borrower to provide in order to secure a loan.
False
Financial leverage refers to the entrepreneur's ability to utilize debt to increase ROI.
True
Collateral is an asset that is offered to the lender as loan insurance.
True
A balloon payment is often necessary due to the lower principal paid back in the early part of the loan.
True
During the Golden Age of Hotel Financing loans were based on a percentage of value, determined by an appraisal with little consideration of cost.
True
______________is a fixed obligation or liability of the business that must be paid back, with interest, over a specified period.
Debt
______________ is ownership in the business that does not require immediate repayment, but a return on the capital invested is expected.
Equity
______________occurs when a business's liabilities exceed its assets and the company is unable to meet its current financial obligations.
Bankruptcy
A ______________ loan is used to start or expand a company.
business
A ______________ rate is one that fluctuates with the market rate of interest.
variable
Too Big To Fail focuses on what company? (Two Words) ______________
Lehman Brothers
The cost of this bankruptcy has now exceeded what $ amount? ______________
$1 Billion
A certificate of deposit is a savings vehicle that gives the purchaser the right to receive interest.
True
WACC is the blended cost of debt and equity used to finance a deal.
True
A single sum investment is also known as a lump sum investment.
True
A regular annuity is a fixed amount of money received at the beginning of each compounding period.
False
A perpetuity is an annuity that yields the same cash flow for an indefinite period.
True
The hurdle rate is:
an investor's ROI target
What is the approximate present value of $500 to be received at the end of 5 years assuming a 10% discount rate?
$310
What is the approximate present value of $1,500 to be received each year for 10 years assuming a discount rate of 7%?
$10,535
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 15%?
Year 1: 0 Year 2: $10,000 Year 3: $15,000
$17,424
What is the future value at the end of year 7 of a lump sum investment of $20,000 assuming an interest rate of 4%?
$26,319
Because the cost of debt is always more than the cost of equity, most companies try to apply financial leverage as much as possible.
False
An advantage of the IRR method is that it allows managers to compare deals with different sales prices and costs.
True
The terminal selling price:
is the estimated price for which the asset could be sold at the end of the analysis period.
A hotel's market value is based primarily on:
the amount of cash flow it generates or is projected to generate.
An un-leveraged return on investment assumes:
100% equity.
As a hospitality manager you must convince your capital source that a project or venture you are proposing will generate a favorable ______________ on investment,meets your investor's hurdle rate with minimal risk, and merits funding.
Return
Three important components of investment analysis are the weighted average cost of capital, the discount rate, and the ______________ method of valuation.
Cap Rate
______________ internal rate of return differs from IRR in that it assumes the cash flow generated by the project is reinvested at the company's cost of capital.
Modified
The more you use financial leverage, the lower your cost of ______________.
Capital
The lower the ______________ rate used to calculate the terminal sales price of the asset, the higher the sales price.
Discount
Earnings per share (EPS) is calculated by dividing the company's annual EBITDA by the number of shres of its common stock outstanding.
True
Equity markets are stock exchanges where the public can buy and sell shares of stock.
False
The primary goals of a public company are to increase:
earnings per share, the company's stock multiple, and the market price of its common stock.
Employees are affected by steady company growth because
it provides a clear career path for its employees
The __________ was established to enforce the Securities Act of 1933 and the Securities Exchange Act of 1934.
Securities and Exchange Commission
______________ the business of your company is essential to its long-term success.
Growing
The primary goal of management is to increase ________________ value.
shareholder
A popular growth strategy is to generate more sales volume with the same number of assets while maintaining the business's current __________ margin.
profit
________________ involves selling the rights to a company's brand in a specific location or market for a stated number of years.
Franchising
The ultimate growth strategy is to take part in an initial ____________ offering of its stock.
public