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HCM 416 > Final > Flashcards

Final Flashcards

1
Q

Accounting

A

concerns the measurement, in financial terms, of events that reflect the resources, operations, and financing of an organization.

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2
Q

Financial Management

A

provides the theory, concepts, and tools necessary to help managers make better financial decisions.

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3
Q

Role of Finance

A

is to plan for, acquire, and utilize resources to maximize the efficiency and value of the organization.

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4
Q

Finance activities include:

A 
Planning and budgeting
Financial reporting
Capital investment decisions
Financing decisions
Working capital management
Contract management
Financial risk management
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5
Q

Organizations of Health Services

A

Hospital (inpatient) care
Ambulatory (outpatient) care
Long-term care
Integrated systems

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6
Q

There are four major categories of business organization

A

Proprietorship (sole proprietorship)
Partnership
Corporation
Hybrid forms

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7
Q

Advantages of Proprietorship

A

Ease of formation
Subject to few regulations
No corporate income taxes

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8
Q

Disadvantages of Proprietorship

A

Limited life
Difficult to transfer ownership
Unlimited liability
Difficult to raise capital

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9
Q

Advantages of Corporations

A

Unlimited life
Easy transfer of ownership
Limited liability
Ease of raising capital

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10
Q

Disadvantages of Corporations

A

Cost of formation and reporting

Double (or triple) taxation for investor-owned corporations

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11
Q

Hybrid Forms of Organization (4 types)

A

Limited Partnership
Limited Liability Partnership
Limited Liability Company
Professional Corporation

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12
Q

Limited Partnership

A

General partners have control
Limited partners are liable only for their initial contribution
Not commonly used by healthcare providers

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13
Q

Limited Liability Partnership

A

Partners share general business liability

But, partners are liable only for their own malpractice actions

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14
Q

Limited Liability Company

A

Members are taxed like partners

Liability like stockholders

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15
Q

Professional Corporation

A

Owners have benefits of incorporation
However, still liable for malpractice
Often used by individual clinicians

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16
Q

2 Forms of Ownership

A

Investor-owned (for-profit)

Not-for-profit

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17
Q

The primary goal of Investor-owened businesses is?

A

shareholder wealth (stock price) maximization.

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18
Q

The primary goal of not-for-profit businesses is?

A

generally given by a mission statement, often in terms of service to the community.

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19
Q

Taxes influence:

A

Financing decisions
The operating cash flows available to an investor-owned business
The ability to raise contribution capital

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20
Q

Types of taxes:

A

Federal versus state versus local
Personal versus corporate
Ordinary income versus capital gains

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21
Q

Not-for-profit corporations have two additional tax benefits:

A

Can issue tax-exempt (municipal) bonds

Can receive tax-exempt contributions

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22
Q

Reimbursement Methods

A

FFS (Fee-for-service)

Capitation

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23
Q

Financial accounting

A

identifying, recording, and communicating the operational results and status of an organization (as opposed to a subunit).

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24
Q

Three most important financial statements

A

Income statement
Balance sheet
Statement of cash flows

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25
Q

Securities and Exchange Commission (SEC)

A

has the legal authority to regulate the form and content of financial statements.

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26
Q

The SEC relies on

A

Financial Accounting Standards Board (FASB)
Industry Committees of the American Institute of Certified Public Accountants (AICPA)
Principles and Practices Board of the Healthcare Financial Management Association (HFMA)

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27
Q

What are generally accepted accounting principles (GAAP)?

A

The conventions that have evolved from the pronouncements and rulings of the implementing organizations constitute a widely accepted set of guidelines for the preparation of financial statements.

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28
Q

Cash accounting

A

recognizes an event when a cash transaction takes place.
Simple and easy
Mimics tax statements

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29
Q

Accrual accounting

A

recognizes an event when an obligation is created.
More complicated
Provides a better picture of the true economic status of a business
Is required by GAAP

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30
Q

matching principle

A

Revenues must be matched with the accounting period in which they are earned.
Expenses must be matched with the revenues to which they are related.

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31
Q

a chart of accounts is used to?

A

assign numeric identifiers to individual accounts.

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32
Q

other names for an income statement

A

Statement of operations

Statement of activities

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33
Q

Income Statement contains

A

Revenues
Expenses
Net Income

34
Q

What are Expenses?

A

represent the resources used to create revenues–they are the costs of doing business. Like revenues, expenses do not necessarily reflect cash outlays.

35
Q

Insurance expense

A

represents the cost of commercial insurance purchased to protect the clinic against several risks, including: Property risks such as fire and weather and liability risks such as managerial malfeasance and medical liability

36
Q

Depreciation expense

A

arises because of the matching principle–expenses must be matched to the revenues with which they are associated.

37
Q

In not-for-profit businesses, net income typically is called?
(three names)

A

Revenues over expenses
Excess of revenues over expenses
Change in net assets

38
Q

In financial statement analysis

A

values may be combined to form ratios that have easily interpretable economic meaning.

39
Q

What is in a balance sheet

A

Accounting identity
Assets
Liabilities and equity

40
Q

Current assets include:

A

Cash and other assets that are expected to be converted into cash within the next year: Marketable securities, Net patient accounts receivable, Inventories

41
Q

Marketable securities (MS) are?

A

short-term investments in highly liquid, typically low-risk, securities: One example is Treasury bills (T-bills), MS are reported at cost, but their current market value is given in the footnotes.

42
Q

Net patient accounts receivable

A

represents revenues owed to the business but not yet collected.

43
Q

Long-term investments

A

investments in securities (financial assets) as opposed to buildings and equipment (real assets) that have maturities greater than one year.

44
Q

fixed assets (property and equipment)

A

represent real assets (as opposed to financial assets) having useful lives greater than one year.

45
Q

Gross fixed assets

A

reports the historical cost of property and equipment.

46
Q

Net fixed assets

A

reflect an adjustment for accumulated depreciation.

47
Q

What are liabilities?

A

represent claims against assets that are fixed by contract.

48
Q

What art current liabilities?

A

are those obligations that come due (must be paid) within one year (accounting period). Include: notes payable, accounts payable, accrued expenses

49
Q

What are notes payable?

A

short-term debt obligations, typically bank loans.

50
Q

What are accounts payable?

A

stems from buying goods (typically medical supplies) from vendors on credit called trade credit.

51
Q

What are accrued expenses (accruals)?

A

are payment obligations of the business, primarily: salaries to employees, taxes to government authorities, interest payments to debt suppliers

52
Q

What are incurred but not reported (IBNR) expenses?

A

an important current liability account for providers with a high percentage of capitated revenues. Such as payment being received before service is provided.

53
Q

What is long-term debt?

A

it represents debt financing with maturities greater than one year.

54
Q

What is equity?

A

represents the non-liability claims against a business’s assets.

55
Q

What is the statement of cash flows?

A

it combines both income statement and balance sheet data to create an income statement-like report that focuses on cash flows.

56
Q

What is a financial performance analysis?

A

assesses a business’s financial condition: Does it have the financial capacity to meet its mission.

57
Q

Financial statement analysis :

A

focuses on the information in a business’s financial statements with the goal of assessing financial condition.

58
Q

Operating indicator analysis :

A

focuses on operating data with the goal of explaining financial performance.

59
Q

MVA and EVA:

A

analysis focuses on assessing managerial performance.

60
Q

What is profitability?

A

Is the business generating sufficient profits?

61
Q

What is liquidity?

A

Can the business meet its cash obligations?

62
Q

What is debt management?

A

Is the business using the right mix of debt and equity?

63
Q

What is asset management?

A

Does the business have the right amount of assets for its volume?

64
Q

What is profit analysis?

A

is a technique used to assess the effects of alternative volume assumptions on costs and profits

65
Q

What is the contribution margin?

A

the difference between per visit (unit) revenue and the variable cost rate.

66
Q

If reimbursement is capitation then the provider’s financial risk is minimized if ________.

A

Costs are fixed

67
Q

If reimbursement is fee-for-service then the provider’s financial risk is minimized if ________.

A

costs are variable

68
Q

Direct costs are:

A

costs unique and exclusive to a sub-unit.

69
Q

Indirect or overhead costs are:

A

costs associated with shared resources used by the entire organization.

70
Q

What is the overhead amount of cash to be allocated?

A

the cost pool

71
Q

What is the basis on which the cost pool will be allocated?

A

the cost driver

72
Q

Budget types:

A

Statistics budget
Revenue budget
Expense budget
Operating budget

73
Q

________ are detailed plans, often expressed in dollar terms, that specify how resources will be used over some period of time.

A

budgets

74
Q

The _________ _________ combines volume data from the statistics budget with detailed resource utilization data to forecast expenses.

A

the expense budget

75
Q

What is an FTE

A

the number of full-time equivalents

76
Q

What is par value of a bond?

A

Stated face value of the bond.

77
Q

What is the coupon rate of a bond?

A

Stated interest rate on the bond.

78
Q

What is the Maturity date of a bond?

A

Date when the par value will be repaid to investors.

79
Q

_________ ___________ is the analysis of potential additions to a business’s fixed assets.

A

Capital budgeting

80
Q

Operating leases are:

A

Short-term, cancelable, and maintenance is usually included.

81
Q

Financial leases are:

A

long-term, non cancelable, maintenance is usually not included.

HCM 416 (2 decks)

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