HSA 464 EXAM 2 PRACTICE QUESTIONS AND
ANSWERS 100% CORRECT
Working capital is defined as the Answer - sum of a healthcare organizations
investment in current assets
Examples of current assets include Answer - inventories and prepaid expenses
Liquidity refers to Answer - how quickly an asset can be converted to cash
What are the advantages of having sufficient working capital on hand? Answer
- organizations are able to pay their employees and vendors on time, thereby
maintaining a positive relationship; organizations have sufficient resources to
repay loans and are therefore creditworthy
Where does initial working capital for for-profit healthcare organizations come
from? Answer - the sale of stock
Permanent working capital is Answer - the minimum amount of working
capital always on hand
sources of temporary working capital include Answer - trade credit; equity;
debt
, An organization using trade credits to finance temporary working capital is
essentially Answer - borrowing money from a vendor by delaying payment to
the vendor for goods or services already received
What does the term "5-15, net 30" mean? Answer - an organization can
receive a 5 % discount if it pays within 15 days
what are cash flows Answer - the difference between cash receipts and cash
disbursements
why do healthcare organizations keep cash on hand? Answer - for the
expected demand to pay employees and vendors in cash; for emergencies and
unexpected purchases; for the unexpected demand for cash when a vendor
offers a price reduction the organization does not want to pass up
The average payment period ratio indicates Answer - the average amount of
time that passes before a current liability is paid
accounts receivable are Answer - money due to the organization from patients
and third parties for services already rendered
Which of the following factors set the healthcare industry apart from other
industries regarding accounts receivable? Answer - the cost of services; the
method of payment for services
What is the primary source of data required for reimbursement from third
parties? Answer - the medical record
An organization incurs carrying costs Answer - when it extends credit to
patients after providing services
ANSWERS 100% CORRECT
Working capital is defined as the Answer - sum of a healthcare organizations
investment in current assets
Examples of current assets include Answer - inventories and prepaid expenses
Liquidity refers to Answer - how quickly an asset can be converted to cash
What are the advantages of having sufficient working capital on hand? Answer
- organizations are able to pay their employees and vendors on time, thereby
maintaining a positive relationship; organizations have sufficient resources to
repay loans and are therefore creditworthy
Where does initial working capital for for-profit healthcare organizations come
from? Answer - the sale of stock
Permanent working capital is Answer - the minimum amount of working
capital always on hand
sources of temporary working capital include Answer - trade credit; equity;
debt
, An organization using trade credits to finance temporary working capital is
essentially Answer - borrowing money from a vendor by delaying payment to
the vendor for goods or services already received
What does the term "5-15, net 30" mean? Answer - an organization can
receive a 5 % discount if it pays within 15 days
what are cash flows Answer - the difference between cash receipts and cash
disbursements
why do healthcare organizations keep cash on hand? Answer - for the
expected demand to pay employees and vendors in cash; for emergencies and
unexpected purchases; for the unexpected demand for cash when a vendor
offers a price reduction the organization does not want to pass up
The average payment period ratio indicates Answer - the average amount of
time that passes before a current liability is paid
accounts receivable are Answer - money due to the organization from patients
and third parties for services already rendered
Which of the following factors set the healthcare industry apart from other
industries regarding accounts receivable? Answer - the cost of services; the
method of payment for services
What is the primary source of data required for reimbursement from third
parties? Answer - the medical record
An organization incurs carrying costs Answer - when it extends credit to
patients after providing services
