C428 PRE-ASSESSMENT: FINANCIAL RESOURCE MANAGEMENT IN HEALTHCARE PKJCAttempt #1  

C428 PRE-ASSESSMENT: FINANCIAL RESOURCE MANAGEMENT IN HEALTHCARE PKJC Attempt #1 1. A medical center is expanding its hospital staff to accommodate the increasing number of flu cases seen over the past weeks. Which type of finance activity is described in this scenario? YOUR ANSWER CORRECT ANSWER Cost Cash Capital Control 2. A healthcare organization's senior finance leader is responsible for all financial plans and activities related to reimbursement, accounting, budgeting, and management for a healthcare system’s financial well-being. Which role matches this description? YOUR ANSWER CORRECT ANSWER Controller Treasurer Staff accountant Chief financial officer 3. The most common structures of hospitals are religious, secular, or academic. These organizations raise capital through donations and tax-exempt debt. What is the legal structure of hospitals that raise capital through these means? YOUR ANSWER CORRECT ANSWER YOUR ANSWER CORRECT ANSWER Not-for-profit: to break even For-profit: to maximize profits For-profit: to maximize shareholder value Not-for-profit: to meet charitable purposes 4. An established diagnostic center needs a new mammogram machine. The center has incurred higher debt and is very highly leveraged but decides to apply for another secured loan at its local bank. What will the bank decide about the secured loan? YOUR ANSWER CORRECT ANSWER The interest rate will be lower. The interest rate will be higher. The interest rate will be variable. The interest rate will remain stable. 5. A private hospital with a successful history of traditional patient care is seeking to open a holistic treatment center off-site. It has secured an initial loan of five million dollars. How would the nature of this venture affect the interest rate that could be expected on the loan? YOUR ANSWER CORRECT ANSWER A lower interest rate loan due to the organization's current assets A higher interest rate loan due to the hospital's success rate A lower interest rate loan due to the location of new site A higher interest rate loan due to the alternative patient care 6. A healthcare organization has the following financial information available in a balance sheet: Assets: Cash of $10,000 Accounts receivable of $5,000 Machinery & equipment of $50,000 Liabilities: Accounts payable of $6,000 Loans payable of $25,000 Common stock of $34,000 The organization decides to use $5,000 of the organization cash reserves to pay off some of the loans payable of $25,000. What is the organization's business debt after the debt is paid off? YOUR ANSWER CORRECT ANSWER $10,000 $15,000 $20,000 $26,000 7. A not-for-profit clinic is required to make monthly payments of $31,819.65 for the next 10 years to repay its long- term debt. The interest rate is 5%. What is the clinic's current level of business debt? YOUR ANSWER CORRECT ANSWER $3 million $4 million $3.5 million $2.5 million 8. An insurance group is in the process of evaluating a zero coupon bond purchase from a healthcare organization that needs capital financing. On January 1, 2001, the bonds were purchased at a discounted rate of $6,757.04 with a 5.5% original-issue yield and semiannual compounding. On which date will they become due if these bonds have a face value of $20,000, and assuming the interest rates remain stable? YOUR ANSWER CORRECT ANSWER YOUR ANSWER CORRECT ANSWER January 1, 2020 December 31, 2020 January 1, 2021 January 1, 2022 9. A healthcare company is a non-profit provider but has had problems maintaining any significant cash balance in its portfolio. The current market trend is favorable long-term interest rates, and the healthcare company wishes to build an addition and repay debt over 20 years. Which debt financing vehicle will provide lower interest payments for this situation? YOUR ANSWER CORRECT ANSWER Bank loans Capital leases Tax-exempt bonds Conventional mortgages 10. A for-profit healthcare organization wants to maximize its return on investment (ROI) in a major equipment purchase by using a financial analysis technique that will determine the point at which the net present value is equal to zero. The capital decision will be based on an 8% current cost of capital throughout the life of the new equipment investment. Which financial analysis method is being used to determine the equipment purchase? YOUR ANSWER CORRECT ANSWER Payback method Net present value Capital restructure Internal rate of return 11. An assisted living center administrator has determined that a renovation of the rehabilitation center will increase the profitability of the organization. Although interest expense will increase 80% from $200,000, the annual net income after renovation is projected to be one million dollars from the previous year's $400,000 profit. The times interest earned ratio industry standard is 3.25. How has this financial analysis impacted the renovation decision? YOUR ANSWER CORRECT ANSWER For every dollar in interest expense, the organization will earn $2.50 in profit. For every dollar in profit earned, the organization will pay $0.20 cents in interest. For every dollar in interest expense, the organization will earn $3.78 in profit. For every dollar in profit earned, the organization will pay $0.36 cents in interest. 12. A hospital board of directors decides to purchase a surgical robot using a line of credit from a local bank. Surgical patient revenues are forecasted to increase by 15% as a result of this purchase. Which set of information will determine whether the purchase was a financial success, once operational? YOUR ANSWER CORRECT ANSWER Surgical business risk Surgical costs and surgical claims Surgical patient satisfaction rate Net present value and internal rate of return 13. A doctor wants to purchase a scan machine to provide bone densitometry screenings. The cost is $75,000 and the doctor can charge $35 per test. The doctor feels that 500 tests can be done per year. The machine can be purchased for cash, financed in full, or leased. This is the doctor's first major investment in a solo practice. What type of project classification is appropriate? YOUR ANSWER CORRECT ANSWER YOUR ANSWER CORRECT ANSWER Replacement Expansion New Regulatory 14. An acute care hospital chief financial officer (CFO) is trying to decide whether to lease or purchase a new computer for the CFO’s administrative assistant. If the CFO purchases the computer outright for the assistant, the total cost will be $4,000; however, a three-year lease for the computer would cost the standard rate of $40/month per $1,000. Which decision is cost-effective regarding the new computer, using break-even analysis? YOUR ANSWER CORRECT ANSWER Lease the new computer because leasing it would be $320 less. Lease the new computer because leasing it would be $1,760 less. Purchase the new computer because leasing it would cost $320 more. Purchase the new computer because leasing it would cost $1,760 more. 15. The current software cost for the coding system in the health information management (HIM) department is $10,000 per year for licensing. Replacement and upgrades of hardware for the system cost $6,000 per year. A new coding system with added features is being considered. The HIM department plans to reconfigure the work area as part of this project with a one-time cost of $10,000. The new software subscription is $8,000 per year, and maintenance fee for hardware of $8,000 per year. With the new coding system, the department expects that it will increase reimbursement by at least $5,000 per year by the end of year one. In addition, the new software system should improve productivity. What is the break-even point? YOUR ANSWER CORRECT ANSWER 1 year 2 years YOUR ANSWER CORRECT ANSWER 3 years 4 years 16. A private practice with excess capacity has received additional state funding to provide services to the underinsured. Reimbursement by the state will be based on a flat percentage of 10% above cost. Which action ensures the likelihood of profitability for the company? YOUR ANSWER CORRECT ANSWER Comparing the practice to its competitors Determining the current source of referrals for the company Increasing the services provided while operating within the current budget Decreasing the services provided while utilizing the prior budget as a reference 17. A medical group has expanded its facilities in anticipation of the Affordable Care Act (ACA). Prior to the ACA, the group accepted insurance from private plans only. Now, many patients have individual policies through a marketplace exchange plan. How will accepting this new form of insurance increase revenue? YOUR ANSWER CORRECT ANSWER It will use the group's excess capacity. It will reduce patient co-pays for services. It will eliminate compliance fines with ACA. It will control the number of contracted providers. 18. The following is a portion of a healthcare organization's budget: What is the budget variance and was the spending over or under budget? YOUR ANSWER CORRECT ANSWER Budget variance was $72,000 and spending was over budget. Budget variance was $72,000 and spending was under budget. Budget variance was $73,000 and spending was over budget. Budget variance was $73,000 and spending was under budget. 19. The following is a portion of a healthcare organization's budget: What is the central supply budget variance, and was the department over or under budget? YOUR ANSWER CORRECT ANSWER The budget variance was $800 and the department was over budget. The budget variance was $800 and the department was under budget. The budget variance was $2,250 and the department was over budget. The budget variance was $2,250 and the department was under budget. 20. As the newly hired administrator at a private ear, nose, and throat (ENT) practice has a goal of the position is to increase patient volume. Many physicians and nurse practitioners (NP) of the practice are not at capacity. Two physicians are specially trained in facial trauma and reconstruction and would like to expand the practice to include these services. The current general ENT patients from these two physicians could be moved to the others to allow for all the physicians to be at full capacity. With this change, it is determined that the NPs are not needed. How will these changes affect the budgetary process? YOUR ANSWER CORRECT ANSWER Capital budget is increased due to surgeries and more patients; capital expenses are down due to less salaries and fringe benefits. Capital budget is increased due to increased surgeries and more patients; operational expenses are down due to less salaries and fringe benefits. Operational budget revenue is increased due to inc