MFD Unit 3 Flashcards
Imprest basis
The system used for petty cash - replenishment for every transaction
Transaction motive
Minimum balances kept to make sure daily check drains are covered
Effective cost
The actual cost when all elements are considered
Effective rate = annual interest in loan/loan -compensation balance required
Cash convention cycle
Generally the shorter the better= the smaller amount of money is then needed
The payables deferral period is different than the operating cycle
Operating cycle
Accounts collection period+inventory holding period
Compute the ccc
Operating cycle-payable deferral period
Income flows
Depreciation has a direct effect
Interest expense has a direct effect
The purchase of equipment has no effect
Dividends had no effect
Cash flows
Depreciation had no effect
Interest expense is part of the mortgage payment
Payment of equipment is listed
Dividends payable is listed
Cash budgeting
Prepared to reflect the estimated cash receipts and cash disbursements for the period
Investing excess cash
Risk - probability of loosing on the investment
Return - rate of return on investment
Liquidity - ability to convert investment to cash
Cost - the brokage cost of investing
Size- the amount of funds available for investments
Time - how long are the cash invested
Generally the longer the investment us and higher the risk is the bigger is the return
Cash receipts and disbursement approach
Forecasting cash receipts up to 6 months
Show some direct source and direct use of the cash
Adjusted net income approach
Period longer than six months
Used by management
Used both external and internal sources of funds - is indirect in its showings
Focus on account receivable, inventories and current liabilities
Operation budget
Schedule of debt payments
Expenses related to property and equipment
Payroll payments
Payments for inventory
Cash receipts
Collection experience
Percentage of sales and credit sales
The payment schedule for other operating schedules
Forecast of dividends payments and purchases of equipments, investments and property
Float
The time between the transaction in the company books and the actual transaction effecting the account
Collection float
The time from when the hotel gets the check from the guest, registered in the books to when the check actually can use the funds
Disbursement float
Payment float
The hotel writes a check, decreasing the funds in the books, to when the funds are actually deducted from the account
Working capital
Current asset - current liabilities
Lockbox system
System which speeds up the process of cash from receivables to the hospitality business through the bank post office box
Costs of a lockbox system
Break even amount =
bank charge per item/daily interest rateX change in time
Trade fees
Do not charge interest for the amount owed in the normal course of the hotel
Effective interest rate
Cash discount/invoice amount - cash discount X days in years / difference between end of discount period and final due day
Net float
The difference between collection float and payment float
Gift card breakage
Amount of guest cards not used / redeemed
Integrated cash management system
Cash management system for multi unit operations
Determined interest of loan
Principal X interest rate X time
= interest principal x interest rate xtime
Petty cash
Cash for minor purchases by the company
Capital expenditure
From which the benefits are expected to be received over a period greater than a year
Building
Equipment
Revenue expenditure
Benefits the business within 12months
Capital expenditures shows:
Spending on lodging properties increases as the properties age
