Healthcare Finance Exam 4 Questions
with complete solution 2025/2026
Budget - correct answer ✔a plan, expressed in dollars for a future period.
What does a budget do? - correct answer ✔Predicts future demands for services, projects available
financial resources, requires updates as conditions change
The operating budget - correct answer ✔combines annual revenue budget and annual expenditure
budget
Expenditure budget comprised of - correct answer ✔approved operating budgets for all departments,
approved capital replacements and improvements, annual depreciation and amortization
Revenue budget comprised of - correct answer ✔projected revenues from medical services, projected
non-patient revenues
Major cost headings for department budgets (the operating budget) - correct answer ✔salaries and
benefits, operating expenses (equipment rentals, continuing education costs, repairs, misc costs),
Allocated costs (maintenance, utilities, insurance, etc.)
Developing the operating budget - correct answer ✔dept managers project salaries/benefits based on
current expenses and projected changes, project expenses based on recent experience, known increases
in prices and estimates of future costs, dept budgets combined to create this
Full time equivalent (FTE) position (authorized personnel budget) - correct answer ✔standard is one
employee working 8 hrs/day, 5 days/wk, 52 wk/yr (2080 hrs/year). Vacation time and sick days not
counted. Personnel requirements for depts are stated as number of FTEs even if many positions are part
time
,Capital Budget - correct answer ✔schedules purchased of assets with long useful lives
Capital budget business defines/determines - correct answer ✔the types of purchases that are
considered capital (typical def: cost >$2500 and life > one year. determines years of capital budget
(typical span 5-10yrs. review existing capital assets and their expected obsolescence dates
Capital budget estimates - correct answer ✔costs of capital assets than will need to be replaced.
Calculat total costs of cap asset replacement for each year of budget. Determine how to pay for cap
expenditure (internally generated funds/borrowing. Capital budget updated annually
Statistical budget - correct answer ✔projects revenues from services to patients. all services listed,
volumes (encounters) of services estimated. weight (multiple of base charge) assigned to each service
Revenue budget - correct answer ✔uses statistical budget data times projected revenue per base
charge
the cash budget - correct answer ✔addresses flutuations of encounters and reimbursements. annual
budget dived into monthly columns, monthly portions allocated based on past exp/known changes.
some months may have negative cash flows, planning will allow facility to cover those months w/o
borrowing
First with its projected demand for services - correct answer ✔statistical budget
prepared based on personnel and operating costs needed to meet the demand - correct answer
✔expense budget
prepared and first year of that budget included in annual budget - correct answer ✔capital budget
, prepared - correct answer ✔cash budget
Top down (authoritarian) budgeting - correct answer ✔top management controls budget with minimal
input from unit managers
Bottom up (participatory) budget - correct answer ✔unit managers have direct input (they learn about
organizations goals and financial limitations
Incremental budgeting - correct answer ✔adds funds for inflation and projects demands for services
zero base budgeting (ZBB) - correct answer ✔units must justify every aspect of their budgets from base
of zero. Time consuming process that requires great effort from all managers
Balancing the budget - correct answer ✔operating revenues should cover operating expenditures plus
debt service payments and capital investments
Prudent approach: - correct answer ✔start with realistic revenue budget and make cuts to expenditure
budget
Variance analysis - correct answer ✔comparison of budged vs actual revenues and expenditures
Budget control - correct answer ✔level of flexibility provided to unit managers in using budgeted funds.
Line item control: most stinget. Department budget control: most flexible
Budget amendment - correct answer ✔approval to move funds from one budget item to another
Budgeting for smaller medical facilities - correct answer ✔budgeting provides early warning of financial
problems. Budgeting system can detect employee embezzlement
with complete solution 2025/2026
Budget - correct answer ✔a plan, expressed in dollars for a future period.
What does a budget do? - correct answer ✔Predicts future demands for services, projects available
financial resources, requires updates as conditions change
The operating budget - correct answer ✔combines annual revenue budget and annual expenditure
budget
Expenditure budget comprised of - correct answer ✔approved operating budgets for all departments,
approved capital replacements and improvements, annual depreciation and amortization
Revenue budget comprised of - correct answer ✔projected revenues from medical services, projected
non-patient revenues
Major cost headings for department budgets (the operating budget) - correct answer ✔salaries and
benefits, operating expenses (equipment rentals, continuing education costs, repairs, misc costs),
Allocated costs (maintenance, utilities, insurance, etc.)
Developing the operating budget - correct answer ✔dept managers project salaries/benefits based on
current expenses and projected changes, project expenses based on recent experience, known increases
in prices and estimates of future costs, dept budgets combined to create this
Full time equivalent (FTE) position (authorized personnel budget) - correct answer ✔standard is one
employee working 8 hrs/day, 5 days/wk, 52 wk/yr (2080 hrs/year). Vacation time and sick days not
counted. Personnel requirements for depts are stated as number of FTEs even if many positions are part
time
,Capital Budget - correct answer ✔schedules purchased of assets with long useful lives
Capital budget business defines/determines - correct answer ✔the types of purchases that are
considered capital (typical def: cost >$2500 and life > one year. determines years of capital budget
(typical span 5-10yrs. review existing capital assets and their expected obsolescence dates
Capital budget estimates - correct answer ✔costs of capital assets than will need to be replaced.
Calculat total costs of cap asset replacement for each year of budget. Determine how to pay for cap
expenditure (internally generated funds/borrowing. Capital budget updated annually
Statistical budget - correct answer ✔projects revenues from services to patients. all services listed,
volumes (encounters) of services estimated. weight (multiple of base charge) assigned to each service
Revenue budget - correct answer ✔uses statistical budget data times projected revenue per base
charge
the cash budget - correct answer ✔addresses flutuations of encounters and reimbursements. annual
budget dived into monthly columns, monthly portions allocated based on past exp/known changes.
some months may have negative cash flows, planning will allow facility to cover those months w/o
borrowing
First with its projected demand for services - correct answer ✔statistical budget
prepared based on personnel and operating costs needed to meet the demand - correct answer
✔expense budget
prepared and first year of that budget included in annual budget - correct answer ✔capital budget
, prepared - correct answer ✔cash budget
Top down (authoritarian) budgeting - correct answer ✔top management controls budget with minimal
input from unit managers
Bottom up (participatory) budget - correct answer ✔unit managers have direct input (they learn about
organizations goals and financial limitations
Incremental budgeting - correct answer ✔adds funds for inflation and projects demands for services
zero base budgeting (ZBB) - correct answer ✔units must justify every aspect of their budgets from base
of zero. Time consuming process that requires great effort from all managers
Balancing the budget - correct answer ✔operating revenues should cover operating expenditures plus
debt service payments and capital investments
Prudent approach: - correct answer ✔start with realistic revenue budget and make cuts to expenditure
budget
Variance analysis - correct answer ✔comparison of budged vs actual revenues and expenditures
Budget control - correct answer ✔level of flexibility provided to unit managers in using budgeted funds.
Line item control: most stinget. Department budget control: most flexible
Budget amendment - correct answer ✔approval to move funds from one budget item to another
Budgeting for smaller medical facilities - correct answer ✔budgeting provides early warning of financial
problems. Budgeting system can detect employee embezzlement
