Finacial

Question 1

Which of these represent the determination of financial statement entry relationships and the fractional structure that results provides a concise reference to performance. They are generally used to assess aspects of profitability, solvency, and liquidity.

1. Key Performance Indicators
2. Ratios
3. Percentages
4. Contrast Parallels

Answer 1

Key Performance Indicators ?

Question 2

In regards to changing organizational culture; there are five key steps in making a culture change within a practice. What are those five steps, and of those five steps, which step states (among other things) that “The bottom line is that if a leader wants to create a different culture within the hospital, the leader has to go first”?

Define the culture.

Align behaviors with the desired culture.

Commit to the change.

Support the shift.

Grow the team.

Answer 2

Commit to the change contains the statement that to create a different culture, the leader has to go first.

Question 3

The difference between the cost of a product and the revenue it generates is called what?

Answer 3

Gross Profit Margin

Question 4

Which expenses are considered more controllable, Direct Expense or Indirect Expense?

Answer 4

Direct Expenses are usually more controllable because they relate directly to specific income production.

Question 5

An organization’s debts or other obligations which must be discharged within a short time (usually within the earnings cycle, or one year) are called what?

Answer 5

Current Liabilities.

Question 6

If the practice currently has $94,250 of cash on hand and the annual operating expenses of the practice are $1,677,000, how many days cash balance do you have and is that a healthy number for the practice?

Answer 6

A – 14.6 days. As a general rule, it is a good business practice to keep 20 to 30 days’ worth of cash on hand to ensure liquidity issues do not arise.

Financial Management of the Veterinary Practice page 73

Question 7

In its simplest form, the inventory turnover ratio is computed for drug and medical supply purchases made over the course of a single year.

The ratio equals the total number of purchases divided by the average inventory value on hand.

To find the inventory turnover ratio begin by calculating the average inventory on-hand (AI). This is the sum of the beginning inventory (BI) and the ending inventory (EI) divided by 2. The result is the average on-hand inventory.

(BI + EI)/2 = AI

Now that you have the AI, you can compute the inventory turnover ratio. Divide the total purchases during the year (DMSP) by the average on-hand inventory value, as calculated in the first step.

DMSP/AI = Inventory Turn Over Ratio

For our purposes today we will use these numbers –

Beginning inventory January 1 - Clavamox 125mg = $3,000

Ending inventory December 31 - Clavamox 125mg = $2,500

Total Clavamox purchases for the year = $26,000

Answer 7

Using these numbers what is the AI? $2,750

Now, what is the Inventory turnover ratio? 9.5

Is the Inventory Turnover ratio you calculated considered an acceptable number of “turns per year”?

4-8 or 8-10 turns per year have both been cited.

Question 8

In general, the ____________ the turn-over ratio for a given period of time, the tighter the inventory control.

Answer 8

Higher

Question 9

Using all the same numbers as above, what would the Average Shelf Life of Inventory in Days (ASLD) be?

Answer 9

38

Practice Made Perfect Pages 329-330.

Question 10

Maximizing inventory turnover is a key strategy in creating an efficient and profitable inventory system. Name 4 ways to increase your inventory turnover.

Answer 10

Answer –

1. Product consolidation
2. Order quantities that make sense
3. Measure and increase compliance
4. Doctor and staff product education

Question 11

What three financial responsibilities are typically outsourced in most practices?

Answer 11

Primary tax preparation and advice

Valuation of the practice

Large financial issues

Question 12

Are wages for doctors who are paid on a salary basis considered a fixed or variable expense?

Answer 12

Fixed

Question 13

Define a Cost of Goods Sold

Answer 13

The product used to provide a service for the client, or products sold to clients.

Question 14

This type of accounting recognizes revenue when it is earned and expenses when they are incurred. When goods are received and services are performed. Is this Cash-based or Accrual-based?

Answer 14

Accrual

Question 15

Which type of accounting is typically considered more accurate?

Answer 15

Accrual

Question 16

Which is another name for the Profit and Loss Statement?

Answer 16

The Income Statement

Question 17

When comparing expenses on the Profit and Loss Statement it is important to express expenses in dollar amounts but also as___________.

Answer 17

A percentage of gross

Question 18

The basic accounting equation is Assets=_______+_________.

Answer 18

Liability +Owner Equity

Question 19

Regarding payroll deductions; what does FICA stand for, what does if fund, and is it paid by the employer, employee, or both?

Answer 19

Federal Insurance Contribution Act-a tax paid by both the employer and the employee to fund Social Security and Medicare.

Question 20

At the end of the year, any independent contractor who received more than $____in wages from the practice must be issued a 1099 form.

Answer 20

$600

Question 21

If the contractor fails to file and pay their taxes, and the practice did not issue a form 1099 at the end of the year, what risk is the practice subject to?

Answer 21

The practice can be held responsible to pay all back taxes, interest, and penalties.

Question 22

AR should be no higher than____%of gross revenue?

Answer 22

1.5

Question 23

When a non-sufficient fund check has been written to the practice, the practice has three choices of action, what are they?

Answer 23

Accept the financial loss

Attempt to collect

Use a third party collection agency

Question 24

Which act regulates collection procedures of past due accounts?

Answer 24

Fair Debit Collection Practice Act

Question 25

Accounts receivable turnover-how many times the accounts receivable balance is converted into cash. What is the formula for AR Turnover?

Answer 25

Credit Sales/Average Accounts Receivable =Accounts Receivable Turnover

Question 26

Regarding the value of the accounts receivable turn-over; is it better to have a higher or lower number?

Answer 26

A higher value for the accounts receivable turnover ratio is better because it indicates the AR balance is turned into cash more often.

Question 27

How can you calculate the average age of the accounts receivable entries?

Answer 27

Beginning AR +Ending AR/2= Average Accounts Receivable

Question 28

If the practice is found to be spending more than it is generating, what steps can be taken to gain control?

Answer 28

Decrease spending and increase revenue

Hold employees accountable for waste

Consider reevaluating your fee structure

Review charges to be sure they are being captured correctly and not missed

If a line of credit is necessary to keep the practice viable in the short term, have a plan to pay back the loan as soon as possible.

Question 29

Expansion, prosperity, contraction, and recession are the four stages of;

A. The budget process

B. The business cycle

C. Exit strategy awareness

D. Business valuation timing

Answer 29

B. The business cycle

Question 30

What are two ways of normalizing revenue and expenses when creating a budget (multiple choice)?

A. Remove any non-recurring items from the previous year

B. Combine the last 3 years as an average

C. Combine annual budget totals and divide by 12 to normalize anticipates monthly expenses.

Answer 30

A. Remove any non-recurring items from the previous year.

B. Combine the last 3 years as an average

Question 31

Which metrics below are important considerations when creating a budget (multiple choice)

A. Last three years Profit and Loss Productivity statements

B. All Lease and loan documents

C. Fee schedule

D list of operational changes expected in the next few years and their potential effect on revenue and/or expense

E. List of major capital

Answer 31

All of the above

Question 32

In regards to creating a Credit Policy; what are two sub policies that you should begin with (Multiple choice)?

A. Client credit policy

B. Client charge policy

C. Charge account policy

Answer 32

A client credit policy

C. Charge account policy

Question 33

What elements should be included in the Charge Account Policy for the practice (multiple choice)?

A. The pre-qualification procedures for a client of unknown standing

B. The process for flagging a pre-qualified client in your practice management system.

C. Acceptable forms of payment as well as storage of credit card numbers to be used as a backup guarantee the client agrees to at signing.

D. Total invoice amount a client can charge without additional approval of management/ownership.

Answer 33

A
B
D

Question 34

A list of procedures to use when considering ways of extending credit to clients includes creating ranges of available credit amounts based on the clients longevity with the practice.

A. True

B. False

Answer 34

B. False

Question 35

What is the consumer price Index?

A. A list or index of prices to measure the change in the cost of basic goods and services.

B. An index report of goods and services used to track consumer spending trends for purposes of determining price points in business.

C. An index of consumable goods created by the Bureau of Labor Statistics that helps establish economic trends in business.

Answer 35

A. A list of prices used to measure the change in the cost of basic goods and services.

Question 36

The consumer Price Index can be instrumental in determining the cost of living increase for a variety of expenses associated with running a veterinary practice.

A. True

B. False

Answer 36

A. True

Question 37

In relation to Fee Analysis; which of the following elements should be included in the calculation(multiple choice)?

A. Variable cost per minute

B. Staff cost per Minute

C. Veterinary cost per minute

D. Fixed cost per min

Answer 37

B
C
D

Question 38

Marsha Heineken DVM states ____%of practices have been victims of fraud or embezzlement.

A. 80%

B. 67%

C. 49.8%

Answer 38

B 67.8%

Question 39

It is recommended that practices do not prosecute confirmed cases of embezzlement unless the loss is determined to be greater than $2000.

A. True

B. False

Answer 39

B. False

Question 40

What entity may be a good resource for the practice in the event embezzlement is suspected?

A. The federal trade commission

B. Your insurance carrier
C. Business protection Agency
D all the above

Answer 40

B. Your insurance carrier

Question 41

What is the percentage of gross if the revenue is $125,000.00 and the expense is $87,365.00?

Answer 41

A. 6.9%

Question 42

What is the final or sixth stage of budgeting?

1. Determining the desired financial results

2 Analysis of the financial statement

3. Normalizing the revenue and expenses
4. Budgeting revenue
5. Budgeting expenses
6. Combining budgeted revenue and expense and making adjustments

Answer 42

6. Combining budgeted revenue and expense and making adjustments

Question 43

Patient volume is considered a _______ _______ of revenue growth.

Answer 43

A. Key Driver

Question 44

A simple method of creating an expense budget is to add what to the base expense figure?

Answer 44

The last three years average growth rate.

Question 45

A simple method of creating an expense budget is to add what to the base expense figure?

Answer 45

A. The last three years average growth rate

Question 46

What is the difference between the client credit policy and the charge account policy?

Answer 46

A. Client credit policy- establishes the pre-qualifications necessary to open a charge account. Example; a client may need a minimum of 2 years of perfect payment history without a problem.

B. Charge Account Policy-establish credit limits, payment due dates, payment methods and invoicing procedures.

Question 47

The fee schedule should be reviewed minimally____ a year.

Answer 47

A. Once

Question 48

As a refresher the following is the formula used to determine fees;

(Fixed cost/minute + (length of procedure in DVM minutes)+(direct costs x 2) + Profit.

Using the totals below what price should you charge for this service?

Fixed costs=$2.35
Staff costs per min=1.82
Staff time=2 technicians, 6 min each
DVM cost per min=$3.09
DVM time =3min
Direct cost =.87
Profit set point=20%

Formula=(2.35+1.82)x(12 min)+(3.09)x(3min)+(.87x2)+20%

Answer 48

73.26

Question 49

What percent of gross revenue is said to be lost to embezzlement in small business annually?

Answer 49

A. >5%

Question 50

What is the most often used chart of accounts?

Answer 50

A. AAHA

Question 51

Why is a petty Cash system suggested over using cash from the reception drawer for smaller purchases?

Answer 51

Improve internal controls by providing a system for tracking cash purchases.

Question 52

Your accounts receivable on January 1, 2020 was $22968.75. Your accounts receivable on December 31st, 2020 was $7104.50. What is your Average Accounts Receivable?

Your sales for the year equal=
$43426.98 in credit extended.

$191,207.42 in cash

$237961.80 in checks.

$642,044.50 in credit cards

Using the numbers above and your previous answer, calculate your Accounts Receivable Turnover.

Answer 52

A 22,968.75 + 7104.50=$30,073.25

$30,073.25/2=$15,036.62

B. Credit Sales/ Average AR = AR Turnover

$/$15036.62=2.9

Financial Management pages 67-68

Question 53

What is common sizing?

If your practice had $3691,000 in revenue and $2952,800 in expenses, how would you express the expenses using Common Sizing?

Once calculated using the metrics above, is your answer considered within the preferred benchmark for expenses?

Answer 53

Your expenses are 89% of gross revenue leaving 20% profit for the owner and 20%-30% is considered preferable.

Financial Management for the Veterinary Practice page 34

Question 54

These represent the determination of financial statement entry relationship and the fractional structure that results provide a concise reference to performance. They are generally used to assess aspects of profitability, solvency, and liquidity.

1. Key Performance Indicators

2 Ratios

3 Percentages

4 Contrast Parallels

Answer 54

B Ratios