Chapter 26 - Finanical Managment

Question 1

Accounting

Answer 1

1.The process of collecting, recording, and reporting an organization’s financial data 2.A list of all disclosures made of a patient’s health information.

Question 2

Accounting rate of return (ARR)

Answer 2

The projected annual cash inflows, minus any applicable depreciation, divide by the initial investment

Question 3

Accounts payable

Answer 3

Records of the payments owned by an organization to other entities.

Question 4

Accounts receivable

Answer 4

1. Records of the payments owned to the organization by outside entities such as thirdparty payers and patients 2. Department in a healthcare facility that manages the accounts owed to the facility by customers who have received services but whose payment is made at a later date.

Question 5

Accrue

Answer 5

The process of recording known transactions in the appropriate time period before cash payments/ receipts are expected or due.

Question 6

Activity-based budget

Answer 6

A budget based on activities or projects rather than on functions or departments

Question 7

Balance Sheet

Answer 7

A report that shows the total dollar amounts in accounts, expressed in accounting equation format, at a specific point in time.

Question 8

Capital budget

Answer 8

Budget that focuses on long-term investments

Question 9

Centers for Medicare and Medicaid Services (CMS)

Answer 9

The Department of Health and Human Services agency responsible for Medicare and parts of Medicaid. Historically, CMS has maintained the UB-92 institutional EMC format specifications, the professional EMC NSF specifications, and specifications for various certifications and authorizations used by the Medicare and Medicaid programs. CMS is responsible for the oversight of HIPAA administrative simplification transaction and code sets, heath identifiers, and security standards. CMS also maintains the HCPCS medical code set and the Medicare Remittance Advice Remark Codes administrative code set

Question 10

Conservatism

Answer 10

Compliance of financial data in that they fairly represent the financial results of the period and do not overstate or understate information in a significant (material) way

Question 11

Consistency

Answer 11

Principle that requires that the accounting method not change over the life of the asset

Question 12

Corporation

Answer 12

An organization that may have one or many owners in which profits may be held or distributed as dividends

Question 13

Cost accounting

Answer 13

The specialty branch of accounting that deals with quantifying the resources expended to provide the goods and services offered by the organization to its customers, clients, or patients

Question 14

Current ratio

Answer 14

The total current assets divided by total current liabilities.

Question 15

Days in accounts receivable

Answer 15

The ending accounts receivable balance divided by an average day’s revenues

Question 16

Debt ratio

Answer 16

The total liabilities divided by the total assets

Question 17

Debt service

Answer 17

The current obligation of an organization to repay loans

Question 18

Depreciation

Answer 18

The allocation of the dollar cost of a capital asset over its expected life

Question 19

Direct Cost

Answer 19

Resources expended that can be identified as pertaining to specific goods and services

Question 20

Equity

Answer 20

Securities that are shared in the ownership of the organization.

Question 21

Expense

Answer 21

Amounts that are charged as costs by an organization to the current year’s activities of operation

Question 22

Favorable variance

Answer 22

The positive difference between the budgeted amount and the actual amount of a line item, that is, when actual revenue exceeds budget or actual expenses are less than budget

Question 23

Financial Accounting Standards Board (FASB)

Answer 23

An independent organization that sets accounting standards for businesses in the private sector

Question 24

Fiscal year

Answer 24

A consecutive 12-month period an organization uses as its accounting period

Question 25

Fixed budget

Answer 25

A type of budget based on expected capacity with no consideration of potential variations

Question 26

Fixed cost

Answer 26

Resources expended that is based on multiple levels of projected productivity

Question 27

Flexible budget

Answer 27

A type of budget that is based on multiple levels of projected productivity

Question 28

For-profit organization

Answer 28

The tax status assigned to business entities that are owned by one or more individuals or organizations and that earn revenues in excess of expenditures that are subsequently paid out to owners or stockholders.

Question 29

General ledger

Answer 29

A master list of individual revenue and expense accounts maintained by an organization

Question 30

Generally accepted accounting principles (GAAP)

Answer 30

An accepted set of accounting principles or standards, and recognized procedures central to financial accounting and reporting

Question 31

Going concern

Answer 31

Organization’s ability to operate for the foreseeable future after an analysis of an entity’s financial data

Question 32

Income statement

Answer 32

A statement that summarizes an organization’s revenue and expense accounts using totals accumulated during the fiscal year

Question 33

Indirect cost

Answer 33

Resources that cannot be identified as pertaining to specific goods or services

Question 34

Internal rate of return (IRR)

Answer 34

An interest rate that makes the net present value calculation equal Zero

Question 35

Internal Revenue Service

Answer 35

Entity that regulates and collects federal taxes

Question 36

Liability

Answer 36

1.A legal obligation or responsibility that may have financial repercussions if not fulfilled. 2. An amount owed by an individual or organization to another individual or organization

Question 37

Liquidity

Answer 37

The degree to which assets can be quickly and efficiently be turned into cash

Question 38

Managerial accounting

Answer 38

The development implementation and analysis of systems that track financial transactions for management control purposes including both budget systems and cost analysis systems

Question 39

Matching

Answer 39

A concept that enables decision makers to look at expenses and revenues in the same period to measure the organization’s income performance

Question 40

Materiality

Answer 40

The significance of a dollar amount based on predetermined criteria

Question 41

Net assets

Answer 41

The organization’s resources remaining after subtracting its liabilities

Question 42

Net assets

Answer 42

The organization’s resources remaining after subtracting its liabilities

Question 43

Net income

Answer 43

The difference between total revenues and total expenses

Question 44

Net loss

Answer 44

The condition when total expenses exceed total revenue.

Question 45

Net present value (NPV)

Answer 45

A formula used to assess the current value of a project when the monies used were invested in the organization’s investment vehicles rather than expended for the project; this value is then compared to the allocation of the monies and the cash inflows of the project , both of which are adjusted to current time

Question 46

Not-for-profit organization

Answer 46

An organization that is not owned by individuals whose profits are retained by the organization and reinvested back into the organization for the benefit of the community it serves

Question 47

Operational budget

Answer 47

A type of budget that allocates and controls resources to meet an organization’s goals and objectives for the fiscal year

Question 48

Overhead cost

Answer 48

The expense associated with supporting but not providing patient care services.

Question 49

Partnership

Answer 49

Business relationship where two people share in the responsibility for the business, and income still flows through the individuals’ tax returns

Question 50

Payback period

Answer 50

A financial method used to evaluate the value of a capital expenditure by calculating the time frame that must pass before inflow of cash from a project equals or exceeds outflow of cash

Question 51

Profitability

Answer 51

Refers to an organization’s ability increase in value.

Question 52

Public Company Accounting Oversight Board (PCAOB)

Answer 52

Created by Sarbanes-Oxley Act, this board oversees the audits of companies that are publicly traded. Sarbanes-Oxley had a significant impact on the degree of scrutiny and testing of internal controls, financial reporting, and governance of organizations

Question 53

Return on investment (ROI)

Answer 53

The financial analysis of the extent of value a major purchase will provide

Question 54

Revenue

Answer 54

The recognition of income earned and the use of appropriated capital from the rendering of services during the current period

Question 55

Revenue Principle

Answer 55

States that earning as a result of activities and investments may only be recognized when they have been earned, can be measured, and have a reasonable expectation of being collected

Question 56

Securities and Exchange Commission (SEC)

Answer 56

The federal agency that regulates all public and some private transactions involving the ownership and debt of organizations

Question 57

Sole proprietorship

Answer 57

A venture with one owner in which all profits are considered the owner’s personal income

Question 58

Statement of cash flow

Answer 58

A statement that details the reasons that cash changed from one balance sheet period to another

Question 59

Statement of retained earnings

Answer 59

A statement expressing the change in retained earnings from the beginning of the balance sheet period to the end

Question 60

Statement of stockholder’s equity

Answer 60

A statement detailing the reasons for changes in each stockholder’s equity accounts

Question 61

Total margin ratio

Answer 61

Measurement of overall profitability of an organization that compares excess of revenue over expense by total revenue

Question 62

Variable cost

Answer 62

Resources expended that vary with the activity of the organization

Question 63

Variance

Answer 63

A disagreement between two parts; the square of the standard deviation; a measure of variability that gives the average of the squared deviations from the mean; in f inancial management, the difference between the budgeted amount and the actual amount of an line item; in project management, the difference between the original project plan and current estimates

Question 64

Zero-based budget

Answer 64

Types of budgets in which each budget cycle poses the opportunity to continue or discontinue services based on available resources so that every department or activity must be justified and prioritized annually to effectively allocate resources