Question 1

Startup capital can include venture capital.

Accepted Answer

Startup capital refers to the funds that are required to start a new business, and it can indeed include venture capital among other sources such as angel investment, personal savings, or loans. Venture capital is a form of private equity and financing that investors provide to startups and small businesses that are believed to have long-term growth potential.

Question 2

Working capital is equal to Current Assets less Current Liabilities.
tructure represents the ideal mix of IGF, debt, and equity financing.

Accepted Answer

Working capital is calculated by subtracting current liabilities from current assets, which represents the short-term liquidity position of a company and its ability to cover its short-term obligations.

Question 3

Internally Generated Funds are a result of profitable operations.

Accepted Answer

Internally Generated Funds are funds that are generated from a company's own operations and profits, rather than from external financing sources.

Question 4

A tax shield is the product of prudent financial management such as the strategic application of legal depreciation methods.

Accepted Answer

A tax shield refers to the reduction in income taxes that results from taking an allowable deduction from taxable income. By strategically applying legal depreciation methods, a company can lower its taxable income, thereby reducing its tax liability and effectively managing its financial resources. This is considered a prudent financial management practice.

Question 5

Corporations reward shareholders in the form of dividends.

Accepted Answer

Dividends are payments made by corporations to their shareholders, typically from profits, as a way to distribute a portion of the company's earnings back to its investors.

Question 6

Equity financing can take place by securing "Angel" investors.

Accepted Answer

Angel investors provide equity financing by investing their own funds into startups or small businesses in exchange for ownership equity or convertible debt.

Question 7

An equity kicker is an arrangement in which an individual agrees to provided services to a hospitality enterprise in exchange for little or no pay but a significant portion of the company's shares.

Accepted Answer

An equity kicker is an arrangement in which an individual agrees to provide services to a hospitality enterprise in exchange for little or no pay but a significant portion of the company's shares.

Question 8

Debt financing can include both loans and bonds.

Accepted Answer

Debt financing refers to raising funds for company operations or projects by borrowing money, which can be done through issuing bonds or taking out loans.

Question 9

Under most circumstances a hospitality operation cannot secure debt financing unless there is already some equity in place.

Accepted Answer

Debt financing often requires some form of collateral or equity to secure a loan, as lenders typically want assurance that there is some initial investment by the borrower, reducing the risk of default.

Question 10

The optimal capital s

Accepted Answer

The optimal capital stock is the level of capital that maximizes the firm's value.

Question 11

Given the following information what is the Working Capital (WC) value for Niagara Hotels Ltd?
Current Assets:= $480,000
Current Liabilities:= $360,000

Accepted Answer

Working Capital (WC) is calculated as Current Assets minus Current Liabilities. Therefore, WC = $480,000 - $360,000 = $120,000.

Question 12

IGF can be increased by:

Accepted Answer

IGF, or Internal Growth Rate, can be increased by improving or increasing profitable operations, as this directly impacts the amount of retained earnings available for reinvestment in the company.

Question 13

Angel investors are typically:

Accepted Answer

Angel investors are usually wealthy individuals who provide capital for a business start-up, often in exchange for convertible debt or ownership equity. They are known for investing in the early stages of a company, especially when the business may not yet be attractive to venture capitalists or banks.

Question 14

An "Equity Kicker" can work well for a hospitality startup when:

Accepted Answer

An "Equity Kicker" is beneficial for a hospitality startup when there is little or no working capital available because it allows the startup to offer potential investors an equity interest in the company as an incentive for providing financing, which can be particularly appealing when cash is scarce.

Question 15

Bonds and loans are types of:

Accepted Answer

Bonds and loans are forms of debt financing, where the borrower is required to pay back the principal amount along with interest.

Question 16

The most common form of business organization in Canada is the sole proprietorship.

Accepted Answer

Sole proprietorship is the most common form of business organization in Canada due to its simplicity, ease of setup, and minimal regulatory requirements.

Question 17

Which of the following is a disadvantage with a cooperative?

Accepted Answer

Cooperatives often involve multiple stakeholders with varying opinions and interests, which can lead to potential conflicts among members. This is a recognized disadvantage as it can hinder decision-making and operational efficiency.

Question 18

"Risk" should be thought of as:

Accepted Answer

Risk is defined as the potential for outcomes to deviate from what is expected or planned. It encompasses both positive and negative deviations, not just negative outcomes or specific actions like bad investments or unnecessary management actions.

Quiz 1: Introduction to Canadian Hospitality Financial Management and Fundamental Principles of Financial Management