LSUS MHA 706 FINAL EXAM – PRACTICE QUESTIONS 2026 ACTUAL EXAM 200 QUESTIONS AND CORRECT ANSWERS (VERIFIED ANSWERS

LSUS MHA 706 FINAL EXAM – PRACTICE QUESTIONS
2026 ACTUAL EXAM 200 QUESTIONS AND CORRECT
ANSWERS (VERIFIED ANSWERS




LSUS MHA 706 FINAL EXAM – PRACTICE QUESTIONS 1–200



Question 1

Which financial statement BEST reflects an organization’s financial position at a specific point in time?

A. Income statement
B. Statement of cash flows
C. Balance sheet
D. Operating budget
E. Capital budget

Correct Answer: C. Balance sheet

Rationale: The balance sheet provides a snapshot of assets, liabilities, and net assets at a given date.



Question 2

In a healthcare organization, depreciation expense primarily:

A. Represents a cash outflow
B. Reduces taxable income only
C. Allocates the cost of capital assets over their useful life
D. Reflects market value decline
E. Is recorded only at asset disposal

Correct Answer: C

Rationale: Depreciation systematically allocates asset cost; it is a non-cash expense.

,Question 3

Which ratio BEST measures a hospital’s short-term liquidity?

A. Debt-to-equity ratio
B. Operating margin
C. Current ratio
D. Return on assets
E. Days in accounts receivable

Correct Answer: C

Rationale: The current ratio assesses the ability to meet short-term obligations.



Question 4

A hospital has an operating margin of –2%. This MOST likely indicates:

A. Strong cash reserves
B. Profitable core operations
C. Operating expenses exceed operating revenues
D. High investment income
E. Efficient cost allocation

Correct Answer: C

Rationale: A negative operating margin reflects operating losses.



Question 5

Contribution margin analysis is MOST useful for:

A. Long-term capital financing decisions
B. Determining break-even volume
C. Valuing mergers and acquisitions
D. Assessing liquidity
E. Measuring solvency

Correct Answer: B

Rationale: Contribution margin supports break-even and volume-profit analysis.



Question 6

Which cost is considered a fixed cost in a hospital setting?

,A. Medical supplies
B. Hourly nursing wages
C. Utilities per patient day
D. Building lease expense
E. Laboratory reagents

Correct Answer: D

Rationale: Lease expenses remain constant regardless of volume.



Question 7

The primary purpose of variance analysis is to:

A. Eliminate budgeting
B. Identify differences between budgeted and actual performance
C. Set reimbursement rates
D. Calculate depreciation
E. Forecast long-term demand

Correct Answer: B



Question 8

A favorable variance occurs when:

A. Costs exceed budget
B. Revenues are less than expected
C. Actual performance is better than budget
D. Budget assumptions are inaccurate
E. Volume declines

Correct Answer: C



Question 9

Which payer type generally reimburses hospitals using Diagnosis-Related Groups (DRGs)?

A. Medicaid
B. Commercial insurance
C. Medicare
D. Self-pay
E. Workers’ compensation

Correct Answer: C

, Question 10

The primary financial risk of DRG-based reimbursement is that:

A. Payments increase with length of stay
B. Hospitals are paid regardless of efficiency
C. Costs may exceed fixed reimbursement
D. Revenue is unpredictable
E. It eliminates cost control incentives

Correct Answer: C



Question 11

Which budgeting approach starts from zero and requires justification of all expenses?

A. Incremental budgeting
B. Flexible budgeting
C. Rolling budgeting
D. Zero-based budgeting
E. Capital budgeting

Correct Answer: D



Question 12

Capital budgeting decisions typically involve:

A. Payroll scheduling
B. Short-term cash management
C. Long-term asset investments
D. Supply chain contracts
E. Revenue cycle optimization

Correct Answer: C



Question 13

Net Present Value (NPV) analysis considers:

A. Accounting profit only
B. Cash flows and time value of money
C. Historical costs