Ch 4

Question 1

Define balance sheet, equation and three parts

Answer 1

Snapshot of a detailed outline of what a business owns owes and what it’s worth

Assets = liabilities + equity

Question 2

Four main parts of balance sheet

Answer 2

Current assets
Assets whose use is limited
Property/equipment
Orher assets

Question 3

Define Current assets

Answer 3

Assets expected to be exchanged for cash or consumed during the operating cycle

Question 4

List the different parts of current assets on balance sheet

Answer 4

Cash, cash equivalents, accounts receivable, inventory

Question 5

Define cash & cash equivalents

Answer 5

Cash consists of coin, currency, and available deposited funds at banks

Cash equivalents include savings accounts, certificates of deposit, and other temporary marketable securities

Question 6

Define accounts receivable

Answer 6

Represent legally enforceable claims on customers for prior service or goods

Question 7

Define assets whose use is limited

Answer 7

Cash and investments that can only be spent for specific purposes

Question 8

List the parts in assets whose use is limited

Answer 8

Malpractice funds
Bond trustee

Question 9

Define property and equipment

Answer 9

Represent investment in tangible, permanent assets

Question 10

List the parts of property and equipment

Answer 10

Land and improvements
Buildings and equipment
Construction in progress
Allowance for depreciation

Question 11

Define goodwill

Answer 11

Represents the difference between the price paid to acquire another entity and the fair market value of the acquired entity’s assets, minus any related obligations or liabilities

Question 12

Define allowance for depreciation

Answer 12

Represents the accumulated depreciation taken on the asset to the date of the financial statement

Question 13

List the parts of other assets

Answer 13

Investments in affiliated companies
Goodwill
Debt issuance costs

Question 14

List the main parts of liabilites

Answer 14

Current and non current liabilites

Question 15

Define current liabilities

Answer 15

Obligations expected to require payment in cash during the coming year or operating cycle

Question 16

List the parts of current liabilities

Answer 16

Current installments of Ltd
Accounts payable
Accrued expenses
Construction payable
Estimated third party settlements
Deferred revenue

Question 17

Define current installments of Ltd

Answer 17

Represents the amount of principal that will be repaid on the indebtedness within the coming year

Question 18

List the parts of non current liabilities

Answer 18

Long term debt
Deferred revenue
Estimated malpractice costs

Question 19

Define long term debt

Answer 19

Represents the amount of long term indebtedness not due in the next year

Question 20

Define net assets

Answer 20

The difference between assets and the claim to those assets by third parties or liabilites

Question 21

What is the income statement

Answer 21

Summarizes the operations of an organization with a focus on its revenues, expenses, and profitability

Question 22

Main parts of total revenue in income statement

Answer 22

Net patient service revenue
Other revenue
Provision for bad debt

Question 23

Define net patient service revenue

Answer 23

The revenue from patients after deductions from gross charges

Question 24

Define patient service revenue

Answer 24

The revenue stemming exclusively from patient care

Question 25

Define provision for bad debt

Answer 25

Revenue that is expected but you know won’t be collected

Question 26

Define other operating revenue

Answer 26

Revenue from other activities such as cafeteria services, parking garages, etc

Question 27

List the parts under expenses in income statement

Answer 27

Salaries and benefits
Supplies and drugs
Insurance
Depreciation
interest
other

Question 28

Define supplies and drugs

Answer 28

The cost of all medical supplies used in providing patient care actually consumed during patient care

Question 29

Define depreciation

Answer 29

A noncash expense that represents the financial value an asset loses over time

Question 30

Define interest

Answer 30

Expense paid as part of debt financing

Question 31

Define bad debts

Answer 31

Amount of charges that will not be collected from whom payment was expected

Question 32

Define other income

Answer 32

Income in endowments, tax support, income on reserves, and gains and losses from property sale

Question 33

Define cash flow statement

Answer 33

Provides info that shows an organizations cash inflows and outflows

Question 34

Operating activities definition

Answer 34

Sources and uses of cash tied to operations

Question 35

Cash inflows from operating activities

Answer 35

Cash from patient services
Interest earned

Question 36

Cash outflows from operating activities

Answer 36

Cash paid to employees
Payment of interest
Payment to creditors
Income tax

Question 37

Define investing activities

Answer 37

Cash flows from investment in fixed assets and securities used as alternatives to cash holdings

Question 38

Cash inflows from investing activities

Answer 38

Sale of property and equipment
Sale of investments

Question 39

Cash outflows of investing activities

Answer 39

Purchase of property and equipment
Purchase of investments

Question 40

Define financing activities

Answer 40

Flows that arise from financing of assets and operations

Question 41

Cash inflows from financing activities

Answer 41

Contributions
Sale of stock

Question 42

Cash outflows from financing activities

Answer 42

Payment of long debt financing
Interest paid
Repurchase of company stock
Payment of dividends

Question 43

Cash flow vs income statement

Answer 43

Income statement focuses on accounting and economic profitability

Cash flow statement focuses on cash viability and if the org will generate sufficient cash to meet its long and short term needs