LSUS MHA 706 Comprehensive Study Guide
2025/2026 | Louisiana State University
Shreveport Master of Health Administration
Exam Prep | In-Depth Course Notes, Case Studies,
Health Policy Analysis, Healthcare
Management Strategies, Leadership in
Healthcare, Organizational Behavior,
Healthcare Ethics, Financial Management,
Strategic Planning, Operational Excellence,
and Verified Practice Questions Bundle for MHA
Students
Question 1: What is the primary purpose of the balance sheet in healthcare financial management?
A. To show cash flows over a period
B. To show profitability over a period
C. To show financial position at a specific point in time
D. To show tax liabilities only
CORRECT ANSWER: C. To show financial position at a specific point in time
RATIONALE: The balance sheet provides a snapshot of assets, liabilities, and equity at a specific date,
unlike the income statement which covers a period.
Question 2: Which financial statement reports the revenues and expenses of a healthcare
organization over a specific period?
A. Balance Sheet
B. Statement of Cash Flows
C. Statement of Operations
D. Statement of Changes in Equity
CORRECT ANSWER: C. Statement of Operations
RATIONALE: The Statement of Operations (or Income Statement) details revenues and expenses to
determine net income over a reporting period.
Question 3: In healthcare accounting, what does the term 'liquidity' refer to?
A. The ability to generate profit
B. The ability to meet short-term obligations
C. The total value of assets
D. The level of long-term debt
,CORRECT ANSWER: B. The ability to meet short-term obligations
RATIONALE: Liquidity measures how quickly assets can be converted to cash to pay off short-term
liabilities.
Question 4: Which ratio is best used to assess a healthcare organization's ability to pay off its current
liabilities?
A. Debt-to-Equity Ratio
B. Current Ratio
C. Return on Assets
D. Net Profit Margin
CORRECT ANSWER: B. Current Ratio
RATIONALE: The Current Ratio divides current assets by current liabilities to measure short-term
financial health.
Question 5: What is the primary difference between accrual accounting and cash accounting?
A. Accrual records transactions when cash changes hands
B. Cash accounting records revenues when earned
C. Accrual records revenues when earned and expenses when incurred
D. There is no difference in healthcare settings
CORRECT ANSWER: C. Accrual records revenues when earned and expenses when incurred
RATIONALE: Accrual accounting matches revenues and expenses to the period they occur, regardless
of cash flow timing.
Question 6: Which of the following is considered a current asset on a hospital balance sheet?
A. Land
B. Buildings
C. Accounts Receivable
D. Long-term Investments
CORRECT ANSWER: C. Accounts Receivable
RATIONALE: Accounts Receivable is expected to be converted to cash within one year, classifying it as a
current asset.
Question 7: What does 'net patient service revenue' represent?
A. Total charges billed to patients
B. Revenue after deductions for charity care and contractual allowances
C. Cash collected from patients
D. Revenue from investment activities
CORRECT ANSWER: B. Revenue after deductions for charity care and contractual allowances
,RATIONALE: Net patient service revenue reflects the actual amount expected to be collected after
adjustments.
Question 8: Which depreciation method allocates an equal amount of expense each year?
A. Declining Balance
B. Units of Production
C. Straight-Line
D. Sum-of-the-Years-Digits
CORRECT ANSWER: C. Straight-Line
RATIONALE: Straight-line depreciation spreads the cost of an asset evenly over its useful life.
Question 9: What is the main purpose of a cash flow statement?
A. To show profitability
B. To show changes in cash position from operating, investing, and financing activities
C. To show retained earnings
D. To show tax obligations
CORRECT ANSWER: B. To show changes in cash position from operating, investing, and financing
activities
RATIONALE: The cash flow statement tracks the inflow and outflow of cash across three key activities.
Question 10: Which of the following is a fixed cost in a healthcare clinic?
A. Medical supplies
B. Nurse overtime pay
C. Building rent
D. Prescription drugs
CORRECT ANSWER: C. Building rent
RATIONALE: Rent remains constant regardless of patient volume, characteristic of a fixed cost.
Question 11: What is the formula for calculating the operating margin?
A. Net Income / Total Assets
B. Operating Income / Net Operating Revenue
C. Current Assets / Current Liabilities
D. Total Debt / Total Equity
CORRECT ANSWER: B. Operating Income / Net Operating Revenue
RATIONALE: Operating margin measures the percentage of revenue remaining after paying operating
expenses.
Question 12: Which budgeting approach starts from zero each period?
, A. Incremental Budgeting
B. Zero-Based Budgeting
C. Flexible Budgeting
D. Capital Budgeting
CORRECT ANSWER: B. Zero-Based Budgeting
RATIONALE: Zero-Based Budgeting requires justifying all expenses from scratch rather than adjusting
previous budgets.
Question 13: What is 'working capital' in healthcare finance?
A. Total Assets minus Total Liabilities
B. Current Assets minus Current Liabilities
C. Long-term Debt minus Equity
D. Cash plus Investments
CORRECT ANSWER: B. Current Assets minus Current Liabilities
RATIONALE: Working capital represents the liquid resources available to fund day-to-day operations.
Question 14: Which reimbursement method pays a fixed amount per patient regardless of services
provided?
A. Fee-for-Service
B. Capitation
C. Cost-Based Reimbursement
D. Charge-Based Reimbursement
CORRECT ANSWER: B. Capitation
RATIONALE: Capitation provides a predetermined payment per enrollee to cover all specified services.
Question 15: What is the primary risk associated with high leverage in a healthcare organization?
A. Increased liquidity
B. Increased financial risk and interest burden
C. Lower tax liability
D. Higher operating margin
CORRECT ANSWER: B. Increased financial risk and interest burden
RATIONALE: High leverage means more debt, leading to higher interest payments and risk during
revenue downturns.
Question 16: Which metric measures the average number of days it takes to collect receivables?
A. Days Cash on Hand
B. Days in Accounts Receivable
C. Current Ratio
D. Debt Service Coverage
2025/2026 | Louisiana State University
Shreveport Master of Health Administration
Exam Prep | In-Depth Course Notes, Case Studies,
Health Policy Analysis, Healthcare
Management Strategies, Leadership in
Healthcare, Organizational Behavior,
Healthcare Ethics, Financial Management,
Strategic Planning, Operational Excellence,
and Verified Practice Questions Bundle for MHA
Students
Question 1: What is the primary purpose of the balance sheet in healthcare financial management?
A. To show cash flows over a period
B. To show profitability over a period
C. To show financial position at a specific point in time
D. To show tax liabilities only
CORRECT ANSWER: C. To show financial position at a specific point in time
RATIONALE: The balance sheet provides a snapshot of assets, liabilities, and equity at a specific date,
unlike the income statement which covers a period.
Question 2: Which financial statement reports the revenues and expenses of a healthcare
organization over a specific period?
A. Balance Sheet
B. Statement of Cash Flows
C. Statement of Operations
D. Statement of Changes in Equity
CORRECT ANSWER: C. Statement of Operations
RATIONALE: The Statement of Operations (or Income Statement) details revenues and expenses to
determine net income over a reporting period.
Question 3: In healthcare accounting, what does the term 'liquidity' refer to?
A. The ability to generate profit
B. The ability to meet short-term obligations
C. The total value of assets
D. The level of long-term debt
,CORRECT ANSWER: B. The ability to meet short-term obligations
RATIONALE: Liquidity measures how quickly assets can be converted to cash to pay off short-term
liabilities.
Question 4: Which ratio is best used to assess a healthcare organization's ability to pay off its current
liabilities?
A. Debt-to-Equity Ratio
B. Current Ratio
C. Return on Assets
D. Net Profit Margin
CORRECT ANSWER: B. Current Ratio
RATIONALE: The Current Ratio divides current assets by current liabilities to measure short-term
financial health.
Question 5: What is the primary difference between accrual accounting and cash accounting?
A. Accrual records transactions when cash changes hands
B. Cash accounting records revenues when earned
C. Accrual records revenues when earned and expenses when incurred
D. There is no difference in healthcare settings
CORRECT ANSWER: C. Accrual records revenues when earned and expenses when incurred
RATIONALE: Accrual accounting matches revenues and expenses to the period they occur, regardless
of cash flow timing.
Question 6: Which of the following is considered a current asset on a hospital balance sheet?
A. Land
B. Buildings
C. Accounts Receivable
D. Long-term Investments
CORRECT ANSWER: C. Accounts Receivable
RATIONALE: Accounts Receivable is expected to be converted to cash within one year, classifying it as a
current asset.
Question 7: What does 'net patient service revenue' represent?
A. Total charges billed to patients
B. Revenue after deductions for charity care and contractual allowances
C. Cash collected from patients
D. Revenue from investment activities
CORRECT ANSWER: B. Revenue after deductions for charity care and contractual allowances
,RATIONALE: Net patient service revenue reflects the actual amount expected to be collected after
adjustments.
Question 8: Which depreciation method allocates an equal amount of expense each year?
A. Declining Balance
B. Units of Production
C. Straight-Line
D. Sum-of-the-Years-Digits
CORRECT ANSWER: C. Straight-Line
RATIONALE: Straight-line depreciation spreads the cost of an asset evenly over its useful life.
Question 9: What is the main purpose of a cash flow statement?
A. To show profitability
B. To show changes in cash position from operating, investing, and financing activities
C. To show retained earnings
D. To show tax obligations
CORRECT ANSWER: B. To show changes in cash position from operating, investing, and financing
activities
RATIONALE: The cash flow statement tracks the inflow and outflow of cash across three key activities.
Question 10: Which of the following is a fixed cost in a healthcare clinic?
A. Medical supplies
B. Nurse overtime pay
C. Building rent
D. Prescription drugs
CORRECT ANSWER: C. Building rent
RATIONALE: Rent remains constant regardless of patient volume, characteristic of a fixed cost.
Question 11: What is the formula for calculating the operating margin?
A. Net Income / Total Assets
B. Operating Income / Net Operating Revenue
C. Current Assets / Current Liabilities
D. Total Debt / Total Equity
CORRECT ANSWER: B. Operating Income / Net Operating Revenue
RATIONALE: Operating margin measures the percentage of revenue remaining after paying operating
expenses.
Question 12: Which budgeting approach starts from zero each period?
, A. Incremental Budgeting
B. Zero-Based Budgeting
C. Flexible Budgeting
D. Capital Budgeting
CORRECT ANSWER: B. Zero-Based Budgeting
RATIONALE: Zero-Based Budgeting requires justifying all expenses from scratch rather than adjusting
previous budgets.
Question 13: What is 'working capital' in healthcare finance?
A. Total Assets minus Total Liabilities
B. Current Assets minus Current Liabilities
C. Long-term Debt minus Equity
D. Cash plus Investments
CORRECT ANSWER: B. Current Assets minus Current Liabilities
RATIONALE: Working capital represents the liquid resources available to fund day-to-day operations.
Question 14: Which reimbursement method pays a fixed amount per patient regardless of services
provided?
A. Fee-for-Service
B. Capitation
C. Cost-Based Reimbursement
D. Charge-Based Reimbursement
CORRECT ANSWER: B. Capitation
RATIONALE: Capitation provides a predetermined payment per enrollee to cover all specified services.
Question 15: What is the primary risk associated with high leverage in a healthcare organization?
A. Increased liquidity
B. Increased financial risk and interest burden
C. Lower tax liability
D. Higher operating margin
CORRECT ANSWER: B. Increased financial risk and interest burden
RATIONALE: High leverage means more debt, leading to higher interest payments and risk during
revenue downturns.
Question 16: Which metric measures the average number of days it takes to collect receivables?
A. Days Cash on Hand
B. Days in Accounts Receivable
C. Current Ratio
D. Debt Service Coverage
