Deck 15: Financial Functions in Finance

Question 1

The purpose of financial reporting is

A) To inform internal stakeholders
B) To inform external stakeholders
C) To compile information to support decision-making
D) To compile information to complete required tax forms

Answer 1

B

Question 2

The three major sections of the cash flow statement are

A) Revenues, expenses, and profit
B) Assets, liabilities, and equity
C) Operations, investment, and financing
D) Assets, investment, and equity

Answer 2

C

Question 3

In the cash flow statement under operating activities, which of the following is not a source of cash?

A) Profit
B) Accounts receivable
C) Accounts payable
D) Depreciation

Answer 3

B

Question 4

Which of the following reduce cash?

A) An increase in profit
B) A decrease in accounts receivable
C) A decrease in accounts payable
D) Sale of assets
E) Borrowing money

Question 5

Which of the following statements is true?

A) The cost of capital declines as more debt is added to the capital structure
B) The cost of capital increases as more debt is added to the capital structure
C) Equity is generally cheaper than debt
D) Debt is generally cheaper than equity

Question 6

Capital structure is

A) The mix of equity and debt used to finance assets
B) The mix of short-term and long-term assets
C) The mix of short-term and long-term debt
D) The mix of operating and non-operating income

Question 7

Business risk includes all of the following EXCEPT:

A) Changing consumer tastes
B) Higher interest rates
C) Increased competition
D) Higher input prices
E) Changes in technology

Question 8

In a for-profit organization where profit is taxed and the cost of debt is less than ROE, an increase in debt financing will

A) Reduce after-tax income and ROE
B) Reduce after-tax income and increase ROE
C) Increase after-tax income and reduce ROE
D) Increase after-tax income and ROE

Question 9

If the cost of debt is 5% and equity is 10% and 40% of assets are financed by debt and 60% are financed by equity, the cost of capital is

A) 5.0%
B) 7.0%
C) 7.5%
D) 8.0%
E) 10.0%

Question 10

Revenue cycle, the function that adds the most days to the payment processing and collection cycle, is

A) Accumulating charges during a patient stay
B) Billing the accumulated charges after patient discharge
C) Receiving payment from the patient and/or their insurer
D) Depositing payments into the bank after they are received

Question 11

The cash budget reflects

A) When an obligation is created to pay for a good or service received or provided
B) When actual payments are made for a good or service received or provided
C) The total amount of payments expected to be received from the delivery of goods or services
D) The total amount of payments expected to be made for goods or services received

Question 12

Which of the following metrics does NOT assess the effectiveness of the billing process?

A) Percentage of correct diagnostic codes
B) Days between discharge and billing
C) Percentage of claims without error
D) Percentage of claims rejected

Question 13

Actuarial (occurrence) risk arises from the

A) Use of inputs and/or number of services delivered
B) Price of inputs
C) Need for care
D) Price of outputs

Question 14

The risk associated with inefficient use of inputs or over-provision of services is

A) An actuarial risk
B) A utilization risk
C) A cost risk
D) A financial risk

Question 15

Which reimbursement system places cost, utilization, and actuarial risk on the insurer?

A) Cost
B) Per diem
C) Per case
D) Capitation

Question 16

In per case reimbursement

A) All risk resides with the insurer
B) Cost risk resides with provider and utilization and actuarial risk resides with the insurer
C) Cost and utilization risk resides with provider and actuarial risk resides with the insurer
D) All risk resides with the provider

Question 17

Which reimbursement system shifts actuarial risk to healthcare providers?

A) Charge/Percent of charge
B) Cost
C) Per diem
D) Per case
E) Capitation

Question 18

In which reimbursement system will increasing prices increase revenue?

A) Charge/Percent of charge
B) Per diem
C) Per case
D) Capitation
E) In every system increasing prices increases revenue

Question 19

In which reimbursement system will increasing admissions reduce net income?

A) Charge/Percent of charge
B) Cost
C) Per diem
D) Per case
E) Capitation

Question 20

Risk can be handled in multiple ways, when risk is accepted and minimized by re-insurance it is called

A) Risk avoidance
B) Risk transfer
C) Risk retention
D) Risk forecasting

Question 21

Issuing debt reduces cash balances.

Question 22

Purchasing equipment reduces cash balances.

Question 23

Business risk is the risk inherent in an organization's operations that may reduce profit, including changing consumer tastes, increased competition, and increased input prices.

Question 24

Business risk is the risk associated with meeting contracted interest and principal payments on debt.