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Which of the following tends to insulate management somewhat from the financial results of poor financial planning? (Pick the best answer.)
A. Capitated rates
B. Cost reimbursement
C. Bundled services
D. Charge payment
5 points
Question 2
The cash budget focuses on which of the following major activities:
A. Purchasing of resources
B. Collection
C. Production/sale of service
D. All of the above
5 points
Question 3
Which of the following is an element of budgeted financial requirements that is not included in budgeted expenses?
A. Interest expense
B. Increases in working capital
C. Labor expense
D. A and B
E. None of the above
5 points
Question 4
A department manager most often uses his or her hospitals’ financial information for which of the following uses:
A. Assess the financial condition of the hospital
B. Assess the efficiency of operations
C. Evaluate the hospital’s stewardship
D. Assess the effectiveness of operations
5 points
Question 5
18. You have just advance refunded $50 million of outstanding tax-exempt revenue bonds with $40 million of new debt, which created a gain after considering reimbursement effects of $5.0 million. What could account for this?
A. Higher interest rate on the refunding issue
B. Lower interest rate on the refunding issue
C. Positive arbitrage on the refunding issue
D. None of the above
5 points
Question 6
A not-for profit nursing home has total expenses of $20 million. Sales tax in the state is 7%. Expenses are broken down into salaries ($12 million), supplies ($6 million), and pharmacy ($2 million). The benefit received by the nursing home from the sales tax exemption assuming that pharmacy items are exempt from state sales tax is?
A. $1.4 million
B. $1.26 million
C. $420,000
D. $480,000
5 points
Question 7
Which of the following is not one of the four critical questions that must be answered for dashboard reporting?
A. What is the firm’s strategic vision?
B. What is most important to the firm’s success?
C. What are the critical drivers that influence performance attainment?
D. What are the most relevant measures that reflect critical driver relationships?
5 points
Question 8
What of the following is not one of the characteristics of long-term debt financing?
A. Cost
B. Control
C. Risk
D. Inventory
5 points
Question 9
The controller in a hospital is usually responsible for which of the following activities (choose all that apply):
A. Collection of accounts receivable
B. Developing budgets
C. Filing Medicare cost reports
D. Arranging hospital loans
5 points
Question 10
The heading of every financial statement should contain the:
A. name, title, and place of business
B. name, title, and specific date of statement
C. name, title, specific date of statement, and unit of measurement
D. title, name, type of ownership, and unit of measurement
5 points
Question 11
The Catholic Healthcare Association recognizes which of the following as legitimate areas of community benefit?
A. Bad Debts
B. Unreimbursed Medicare Costs
C. Both A and B
D. Neither A nor B
5 points
Question 12
The following is an example of a _____________ budget: “The budget for the radiology department is different at 90 percent occupancy than at 80 percent occupancy.”
A. rolling
B. forecast
C. flexible
D. fixed
5 points
Question 13
Which of the following is not a “principle” of financial accounting?
A. Historical cost
B. Revenue recognition
C. Continuity
D. Matching
5 points
Question 14
Accounts receivable (net) increased by $500,000 during the year. This increase has what effect on cash flow?
A. Reduces it
B. Increases it
C. No effect
D. All of the Above
5 points
Question 15
What should be a firm’s primary long-term financial objective?
A. profit growth
B. debt growth
C. asset growth
D. equity growth
5 points
Question 16
A statement that reports inflows and outflows of cash during the accounting period in the categories of operations, investing, and financing, is called a(an):
A. Income statement
B. Statement of retained earnings
C. Balance sheet
D. Statement of cash flows
5 points
Question 17
Strategic planning should _________ financial planning.
A. follow
B. precede
C. be contemporaneous with
D. None of the above
5 points
Question 18
The statistics budget:
A. forecasts operating revenues that will be earned during the budget period
B. identifies the amount of service that will be provided by departmental area
C. represents an organization's expected cash inflows and outflows based on the previous years' cash flows
D. identifies operating expenses that are expected to be incurred during the budget period
5 points
Question 19
What is net working capital?
A. Current assets less long-term liabilities
B. Current assets less current liabilities
C. The amount of permanent financing required to finance working capital or current assets.
D. Both B and C
5 points
Question 20
The working capital cycle looks at which of the following:
A. Obtaining cash
B Turning cash into resources and paying bills
C. billing and collecting revenues earned
D. All of the above
5 points
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Jarrod Robel
Jarrod RobelLv2
28 Sep 2019

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23.Which of the following statements about capitation is most correct?

a. Capitation creates a delay between providing services and receiving payment.

b. The capitation payment amount to providers varies significantly from month to month and hence is difficult to predict.

c. Capitation encourages providers to focus on prevention and wellness.

d. Capitation places a greater administrative burden on providers than does fee-for-service payment.

e. Capitation uses a per diagnosis methodology to set hospital payment rates.

24.Which of the following statements about the financial risk to providers under different reimbursement methods is most correct?

a. Risk is the least under cost-based reimbursement.

b. Risk is the most under capitation.

c. Risk is the most under charge-based reimbursement.

d. Statements a. and b. are both correct.

e. Statements a. and c. are both correct.

25.Which of the following statements about the financial risk to providers under different reimbursement methods is most correct?

a. Different payers use different reimbursement methods, so providers face varying levels of risk.

b. Prospective payment transfers the cost risk (of each reimbursable episode) from insurers to providers.

c. Capitation transfers both cost risk and utilization risk to providers.

d. Statements a. and b. are both correct.

e. Statements a., b., and c. are all correct.

32.Which of the following would most likely be considered nonoperating income (versus operating income) on the income statement of a healthcare organization?

a. Revenue from patient care activities

b. Revenue from cafeteria and parking garage operations

c. Premium revenue

d. Income from investments in financial securities

e. Government appropriations

33.Assume Mercy Hospital underestimated the provision for bad debts reported on its December 31, 2015 income statement. What would be the most likely effect on the actual cash flow stemming from the reported net patient service revenue?

a. The cash flow would be less than expected.

b. The cash flow would be greater than expected.

c. The cash flow would not be affected.

d. The cash flow could be either overstated or understated depending on the nature of the bad debts.

e. None of the statements are correct.

34.Meadowlands, a for-profit skilled nursing facility, pays taxes at a rate of 40 percent. Assume Meadowlands recorded depreciation expense of $100,000 for the year ended December 31, 2015. If Meadowlands changed its method of calculating depreciation such that depreciation expense doubled for the year, which of the following statements is most correct?

a. Meadowlands’ net income (after tax) for the year ended December 31, 2015 would increase by $100,000.

b. Meadowlands’ net income (after tax) for the year ended December 31, 2015 would decrease by $100,000.

c. Meadowlands’ estimated cash flow for the year ended December 31, 2015 would increase by $100,000.

d. Meadowlands’ estimated cash flow for the year ended December 31, 2015 would increase by $40,000.

e. Statements b. and d. are both correct.

35.Assume Hospital A is a for-profit organization that pays taxes at a rate of 30 percent and Hospital B is a not-for-profit organization that pays no taxes. If depreciation expense for the year ended December 31, 2015 was doubled (e.g., from $100,000 to $200,000) for both organizations, which of the following statements is most correct?

a. Net income would increase for both Hospitals A and B.

b. Net income would decrease for Hospital A but not for Hospital B.

c. Estimated cash flow would increase for both Hospitals A and B.

d. Estimated cash flow would increase for Hospital A but not for Hospital B.

e. Estimated cash flow would increase for Hospital B butnot for Hospital A.

36.Which of the following statements about revenues, expenses, and net income is most correct?

a. Revenues increase the equity of an organization.

b. Expenses decrease the equity of an organization.

c. Net income (less any dividend payments) increases the organization.

d. Net losses decrease the equity of an organization.

e. Statements a., b., c., and d. are all correct.

37.Which of the following statements about operating income, nonoperating income, and net income is most correct?

a. Operating income typically is greater than net income.

b. For hospitals, nonoperating income includes outpatient services income.

c. Operating income focuses on the profitability of a provider’s core business.

d. Net income is defined as operating income less nonoperating income.

e. Net income focuses on the profitability of a provider’s core business.

38.Which of the following statements best describes the statement of changes in equity?

a. It shows how much of net income is retained within the business.

b. It shows how much of net income flows to the balance sheet equity account.

c. For investor-owned businesses, it shows how much of net income is paid out as dividends.

d. Statements a. and c. are both correct.

e. Statements a., b., and c. are all correct.

44.A nonendowment contribution made to a not-for-profit healthcare organization that the donor specifies is to be used only for the provision of charity care would most likely be classified as:

a. Unrestricted

b. Temporarily restricted

c. Forever restricted

d. Board designated

e. A liability

45.Which of the following statements about the balance sheet is most correct?

a. The balance sheet provides information about the financial position of an organization as of a moment in time.

b. The balance sheet provides detailed information about the assets, liabilities, equity, revenues, and expenses of an organization.

c. The balance sheet is affected by changes in the net income of the organization.

d. Statements a. and c. are both correct.

e. Statements a., b., and c. are all correct.

47. True or False: The balance sheet and income statement together provide detailed information about where a business gets its cash and how that cash is spent.

48.Carlisle Clinic, a not-for-profit organization, began 2016 with an equity balance of $1,000,000. Assuming Carlisle Clinic reported net income of $200,000 for the year ended December 31, 2015, and had no other adjustments to equity during 2015, what was Carlisle Clinic’s equity balance as of December 31, 2014?

a. $800,000

b. $1,200,000

c. $200,000

d.$1,000,000

e. Can’t tell with the information provided

56.Smith Pharmaceuticals is trying to estimate the breakeven volume of sales on a newly developed drug. Which of the following would be expected to reduce the number of pills Smith would need to sell to breakeven (i.e., which would result in a lower breakeven volume) assuming everything else remains the same?

a. An increase in total fixed costs

b. A decrease in the selling price per pill

c. An increase in the variable cost per pill

d. An increase in the unit (per pill) contribution margin

e. An increase in allocated overhead (indirect) costs

57.Assume the local children’s hospital implements an outpatient asthma intervention to improve the health outcomes of children with asthma. As a result, the hospital sees a dramatic reduction in the number of inpatient admissions for children with asthma, but very little change in the total cost of operating the hospital. Which of the following statements describes the most likely reason for the lack of cost savings?

a. The hospital’s cost structure primarily consists of variable costs.

b. The hospital’s cost structure primarily consists of fixed costs.

c. The hospital’s cost structure consists of an equal mix of variable and fixed costs.

d. The hospital reduced its capacity (i.e., downsized) following the drop in admissions.

e. The hospital has a very high variable cost per admission

Roger McDonald, 55 years old and single, is a dental surgeon and owns a dental practice. Roger has accumulated a SGD2,000,000 investment portfolio with a large concentration in small-cap Singapore equities. Over the last 5 years the portfolio has averaged 15 percent annual total return on investment. Roger does not expect to retire before he is 70 years old. His current income is more than sufficient to meet his expenses. Upon retirement, he plans to sell his medical practice and use the proceeds to purchase an annuity to cover his retirement cash flow needs. He has no additional long term goals or needs.
In consultation with Roger, his investment advisor, Justin Teo has drawn up an investment policy statement with the following elements (Justin’s notes justifying each item are included):
Risk tolerance: Roger has above average risk tolerance.
Justin’s notes:
- Roger’s present investment portfolio and his desire for larger returns indicate a high willingness to take risk.
- His financial situation (largely current asset base, has ample income to cover expenses, lack of need for liquidity or cashflow, and long time horizon) indicates a high ability to assume risk.
Return Objective: The return objective is an average total return of 10 per cent or more with a focus on long-term capital appreciation.
Justin’s notes:
- Roger’s circumstances warrant an above-average return objective that emphasizes capital appreciation for the following reasons:
- Roger has a sizable assert base and ample income to cover his current spending; therefore, the focus should be on growing the portfolio.
- Roger’s low liquidity needs and long time horizon support an emphasis on a long term capital appreciation approach.
- Roger does not rely on the portfolio to meet living expenses.
-The numerical objective of 10 per cent represents an estimate of a target Roger can aim for rather than a minimum return required to meet a specific financial goal.

Liquidity: Roger’s liquidity needs are low.
Justin’s notes:
- Roger has no regular cash flow needs from the portfolio, because the income from his medical practice meets all current spending needs.
- No large, one-time cash needs are stated. However, it could be considered appropriate to keep a small cash reserve for emergencies.
Time Horizon: Roger’s time horizon is long term and consists of 2 stages:
(1) The first stage consists of the time until his retirement, which he expects to be 15 years.
(2) The second consists of his lifetime following retirement, which could range
from 10 to 20 years. Justin has also summarised Roger’s current portfolio in Exhibit 1 below:
Value Total Return Deviation
Short-term Bonds $200,000 10% 4.6% 1.6%
Domestic Large-Cap Equities $600,000 30% 12.4% 19.5%
Domestic Small-Cap $1,200,000 60% 16.0% 29.9%
Total Portfolio $2,000,000 100% 13.8% 23.1%
Exhibit 1: Roger’s Current Investment Portfolio


Roger expects to receive an inheritance of SGD2,000,000 soon. Roger and Justin sit down to discuss its investment in one of the four index funds. Given Roger’s already above average risk tolerance and level of portfolio risk, Roger and Justin have concluded that the risk tolerance description in the current IPS remains valid; they do not want to contemplate further increase in portfolio risk. On the other hand, they do not wish to reduce expected return. Justin is evaluating the four index funds shown in Exhibit 2 below for their ability to produce a portfolio that will meet the following two criteria relative to the current portfolio:
- Maintain or enhance expected return, and
- Maintain or reduce volatility.

Each Fund in Exhibit 2 is invested in an asset class that is not substantially represented in the current portfolio shown in Exhibit 1. Exhibit 2 presents statistics on those index
funds.
Expected Expected Correlation of
Index Annual Annual Standard Returns with Current
Fund Return Deviation Portfolio’s Return
Fund A 15% 25% +0.80
Fund B 11% 22% +0.60
Fund C 16% 25% +0.90
Fund D 14% 22% +0.65
Exhibit 2: Expected Risk, Return and Correlation of 4 Index Funds under Consideration

Question 1
(a) Recommend the most appropriate index fund to add to Roger’s portfolio. Justify your recommendations by describing how your chosen fund best meets both of the stated criteria. (No calculations are required.)

(b) Twenty years later, Roger is meeting with you, his new financial advisor. You are evaluating if Roger’s investment policy remains appropriate for his changed circumstances.
- Roger is now 75 years old and retired. His spending requirements are expected to increase with the rate of general inflation, which is expected to average 3.0 per cent annually.
- Roger estimates his current living expenses at SGD150,000 annually. An annuity, purchased with the proceeds from the sale of his medical practice, provides SGD20,000 of this amount. The annuity is adjusted for inflation annually using a national price index.
- Because of poor investment performance and a high level of spending, Roger’s asset base has declined to SGD1,200,000 exclusive of the value of the annuity.
- Roger sold all of his small-cap investment last year and invested the proceeds in domestic bonds.
- Because his international equity investments have performed poorly, Roger has become markedly uncomfortable holding international equities.
-Roger plans to donate SGD60,000 to a charity in three months.

Discuss how each of the following components of Roger’s investment policy statement should now reflect the changes in his (note that the observations should focus on but not limited to the direction and magnitude of change in each component rather than on a specific numeric change):
(i) Risk tolerance
(ii) Return requirement
(iii) Liquidity needs
(iv) Time horizon

(c) Roger’s investment portfolio at 75 years old is summarised in Exhibit 3 below:
Current Expected Expected
Allocation Return Standard Deviation
Cash equivalents 2% 5% 3%
Fixed Income 75% 7% 8%
Domestic Equities 10% 10% 16%
International Equities 3% 12% 22%
Domestic Real Estate 10% 10% 17%
_______________________________________________________________
Exhibit 3: Roger’s Investment Portfolio at Age 75 Years Old


Given Roger’s changed circumstances, state whether the current allocation to each asset class should be lower, the same, or higher. Justify your response with one reason for each asset class. No calculations are required and responses should be based only on Roger’s changed circumstances and the information in
Exhibit 3.
(i) Cash Equivalents
(ii) Fixed Income
(iii) Domestic Equities
(iv) International Equities
(v) Domestic Real Estate

(d) Explain one (1) way in which Roger might seek to reduce the tension between his current return requirement and his current risk tolerance.

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