The Cost of Sales (or Cost of Goods Sold) is usually
considered the most important cost in hospitality businesses. How
is it determined? Please select the most appropriate answer.
1. It is calculated by adding up all purchases of inventory
during one accounting period.
2. It is the amount of inventory on hand. It is calculated by
adding the value of every item of inventory available on
3. It is calculated by adding all purchase amounts to the
beginning inventory amount; and by subtracting the ending inventory
4. It is calculated by multiplying the management's target
percentage (%) of the revenues to the amount of revenues
How can we determine whether the payroll expense has truly
grown in this year compared with that of the last year?
1. Compare the amount of the payroll expense of each year. If
this year's amount is larger, it has grown by the amount of the
2. Compare the amount of each year's payroll expense with the
budget. If the actual expense amount is larger than the budget, it
3. Calculate the percentage (%) of the payroll expense of the
revenues of the year. If this year's payroll expense percentage is
larger than that of the last year, this year's payroll has
4. Calculate the percentage (%) of this year's payroll expense
of the last year's payroll expense. If this year's payroll expense
% is larger than 100%, it has grown.
One company's Balance Sheet shows a huge increase in its
Accounts Receivable (A/R) amount compared with the previous year.
Which analysis of the following would you agree most?
1. The increase of A/R indicates the huge growth of revenues
during the current year. This is considered a positive sign.
2. The increase of A/R indicates that the company has
collected a large amount of cash from its uncollected revenues. It
must have increased its cash flows.
3. The increase of A/R indicates that the company owes a lot
to its creditors this year. When they are paid, the company will
experience a huge cash decrease.
4. The increase of A/R indicates the company has failed to
collect cash from its customers who have not paid. The company must
have experienced huge amount of cash decrease.
If one company's Balance Sheet shows a huge increase of
Inventory balance compared with the previous year, which one of the
following analyses do you think is wrong?
1. The increase of Inventory indicates the company has spent a
lot of expenses during the current year. Its profits must have
2. The increase of Inventory indicates the company is ready to
expand its operations in the next year.
3. The increase of Inventory must have had negative impact on
the cash flows.
4. The increase of Inventory may have temporarily increased
the company's Accounts Payable balance.