MFD Unit 3

Question 1

Imprest basis

Answer 1

The system used for petty cash - replenishment for every transaction

Question 2

Transaction motive

Answer 2

Minimum balances kept to make sure daily check drains are covered

Question 3

Effective cost

Answer 3

The actual cost when all elements are considered

Effective rate = annual interest in loan/loan -compensation balance required

Question 4

Cash convention cycle

Answer 4

Generally the shorter the better= the smaller amount of money is then needed
The payables deferral period is different than the operating cycle

Question 5

Operating cycle

Answer 5

Accounts collection period+inventory holding period

Question 6

Compute the ccc

Answer 6

Operating cycle-payable deferral period

Question 7

Income flows

Answer 7

Depreciation has a direct effect
Interest expense has a direct effect
The purchase of equipment has no effect
Dividends had no effect

Question 8

Cash flows

Answer 8

Depreciation had no effect
Interest expense is part of the mortgage payment
Payment of equipment is listed
Dividends payable is listed

Question 9

Cash budgeting

Answer 9

Prepared to reflect the estimated cash receipts and cash disbursements for the period

Question 10

Investing excess cash

Answer 10

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

Question 11

Cash receipts and disbursement approach

Answer 11

Forecasting cash receipts up to 6 months

Show some direct source and direct use of the cash

Question 12

Adjusted net income approach

Answer 12

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

Question 13

Operation budget

Answer 13

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

Question 14

Float

Answer 14

The time between the transaction in the company books and the actual transaction effecting the account

Question 15

Collection float

Answer 15

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

Question 16

Disbursement float

Payment float

Answer 16

The hotel writes a check, decreasing the funds in the books, to when the funds are actually deducted from the account

Question 17

Working capital

Answer 17

Current asset - current liabilities

Question 18

Lockbox system

Answer 18

System which speeds up the process of cash from receivables to the hospitality business through the bank post office box

Question 19

Costs of a lockbox system

Answer 19

Break even amount =

bank charge per item/daily interest rateX change in time

Question 20

Trade fees

Answer 20

Do not charge interest for the amount owed in the normal course of the hotel

Question 21

Effective interest rate

Answer 21

Cash discount/invoice amount - cash discount X days in years / difference between end of discount period and final due day

Question 22

Net float

Answer 22

The difference between collection float and payment float

Question 23

Gift card breakage

Answer 23

Amount of guest cards not used / redeemed

Question 24

Integrated cash management system

Answer 24

Cash management system for multi unit operations

Question 25

Determined interest of loan

Answer 25

Principal X interest rate X time

= interest principal x interest rate xtime

Question 26

Petty cash

Answer 26

Cash for minor purchases by the company

Question 27

Capital expenditure

Answer 27

From which the benefits are expected to be received over a period greater than a year
Building
Equipment

Question 28

Revenue expenditure

Answer 28

Benefits the business within 12months

Question 29

Capital expenditures shows:

Answer 29

Spending on lodging properties increases as the properties age