Finance and Accounting Flashcards
finance vs. accounting
finance: money management
Accounting: providing financial information
what does 70% of expenses in healthcare come from/
paying the employee
Accounts receivable correlates with what?
revenues: the dollars and cents accrued from doing business
Accounts payable correlates with what?
expenses: the cost of doing business
What are three major sources of revenue/accounts receivable?
cash based services
insurance based services
contracted services
definition of direct costs
it is directly tied to the good or service
definition of indirect costs
something needed for the delivery of the good or service but not directly the service
What are the two main direct costs that you incur?
Salaries and equipment!
What are some examples of indirect costs
rent
electric
overhead
total cost = what other three factors?
fixed cost + variable cost + semi-variable costs
What is the definition of a semi-variable cost?
something that has both a fixed and variable cost (cell phone with data)
in rehab cost is associated with a what?
unit of service; this 1 unit changes based on the setting you’re practicing in
total cost = _____ + ______
total cost = fixed cost + variable cost
average cost = ______/______
average cost = total cost/volume
marginal cost = ______/_______
marginal cost = change in total cost/change in volume
As the volume of visits increases the _______ _____ __ _____goes down
As the volume of visits increases the AVERAGE COST OF VISITS goes down
The average cost diminishes the more _______ you provide
The average cost diminishes the more UNITS OF SERVICE yo . provide
Explain break even analysis
finding the specific volume at which a business neither makes nor loses money
Break even analysis = _____ + ______
break even analysis;
expenses = revenues
Break even quantity = _____/(____-_____)
break even quantity = fixed cost/ (price-variable cost per UOS)
what is the process of identifying, recording, summarizing and reporting in monetary terms, information about an organization during a specific period of time
accounting
Foundation for accounting information systems within an organization is called what?
chart of accounts
Payments that come in are called what?
assets
What is owed to the business is called accounts ______
receivable
When a financial event (transaction) happens, it is posted in a ledger in two places/double entry. What are they?
Increase in entities cash account
Decrease in accounts receivable (what is owed to the business)
______ are economic resources that are owned by a business and are expected to benefit future operations
assets
Intentories Accounts receivables capital assets cash investments
are all what?
Assets! If you went under today what could you liquidate in order to get money
liabilities = ______
debts
total liabilities (debts) make up the amount of the organizations _____ owed by its creditors
assets
Accounts payable
Accrued expenses
notes payable
are all what?
liabilities
balance sheet lists what three things
assets
liabilities
owners equity
Balance sheet tell us _______ ______
net worth/owner’s equity
Owner’s equity = ______ - ________
Owners equity (net worth) = assets - liabilities
net worth is also called what?
owners equity
Assets = ______ + ______
assets = net worth + liabilities
What are the four core fundamental financial statements?
- balance sheet
- income statement
- cash flow statement
- retained earnings statement
What are financial statements?
reports presenting summative information about an organizations revenues and expenses in a standard format
what can be used to compare past and current performance?
financial statements
Each statement is interrelated so together they are used to view the financial health, stability and growth potential of an organization as well
What is a red flag in financial analysis?
variances: they need to be looked at more closely for their cause
which of the four fundamental financial statements shows how an organization’s cash position changes overtime?
Cash flow statement: shows where you’re at at any given point in time with the cash you have on hand
Which one of the four fundamental financial statements would you look at if you wanted to know how much money you have on hand to cover short term liabilities?
cash flow statement
Accounts receivable or payable?
What you think you’ll be paying out
accounts payable
Which one of the four fundamental financial statements would you look at if you wanted to know details on how owner’s equity changed?
retained earnings statement
Which one of the four fundamental financial statements would you look at if you wanted to know how profits are used in a business?
retained earnings statement: tells you if profits are distributed to the owners or reinvestied into the business
what is another name for the retained earnings statement?
owner’s equity statement
Which one of the four fundamental financial statements is a report of an organization’s financial performance over a specific period of time?
income statement: compares monies earned (revenues) to monies spend (expenses)
income statement compares what two things? and what does the difference btwn them give you
revenues to expenses.
The difference btwn the two give you net income or loss from operations
profit and loss statements
statement of operations
are alternate names for which of the four fundemental financial statements?
income statements
Which one of the four fundamental financial statements would you look at to know the “health status” of a business?
income statement
Explain when the contribution margin shows a loss ______ exceeds _____
expenses exceed revenues = loss
Explain when the contritubition margin shows a profit _____ exceeds _____
revenues exceed expenses = profit
revenues = cost is called what point?
break even point
revenue is _____ income
gross income: meaning before anything is taken out or paid
how is revenue (gross income) normally generated?
number of minutes of service, codes for op etc.
Contribution margin = ________ - _______
contribution margin = revenues - expenses
Charge 160 for a visit and you have contractural allowance of 80% of charges what is the revenue?
160(.80)
If revenue is 96 dollars and you spend 50 dollars in money for an individuals visit, what is the contribution margin?
46 dollars
Operating income = contribution margin - allocated expenses
if you have 46 dollars as your contribution margin, and then have 20 dollars allocated expenses, the operating income is actually only 26$
Operating income concept
your contribution margin has to still be positive when you take into account costs that happen no mater if you continue doing business or not (marketing etc). You have to be able to continue to help the organization as the whole.
A ______ is a financial statement that estimates income and expenditures for specified future time periods
budget
Name the three things that generally happen when creating a budget
scan environment
identify goals and objectives complementary to the organizations plan, policies etc.
gather data on estimated costs and revenues
what is the goal of revenue management?
maximize income from operations and investments
setting prices
identifying the payer for each service or product
policies and procedures that address the provision of the service, recording delivery of the service and collecting reimbursement
estimating expected payment
following procedures for payment receipt
Financial reporting
are all ways to manage what?
revenue management
net revenue/1 visit = what?
total revenue/total number of visits
ADC is what and part of what in finance
average daily census; very important for revenue management
name the 6 things that are super important for revenue management
10 volume/average daily census
arrival rate
Units/units per visit
case mix
conversion rate (net revenue as % of charges)
total revenue
arrival rate = _________/______
arrival rate = scheduled visits/actual visits
conversion rate, part of revenue management, is what?
net revenue as % of charges; you have different contractural allowances, based on your case mix you’ll have multiple payors so this looks at everything as a whole.
what is the goal of expense management
maximizing NET income
define operating expenses
cost of resources to produce the organizations serves and goods in a limited time period
define capital expenses
big-ticket, long lasting items
what are most of your expenses in healthcare coming from?
70% is employees!
what is a super important thing to look at with expense management?
management of employees! 70% of expenses in healthcare come from here
influencing the utilization of mixed or variable cost items is part of what piece of management?q
expense management
1 FTE = how many hrs per week?
40
productivity is defined as what
how many hours are they able to bill for based on how many hours they’re available for in a year
(have to get available productive hours first and then determine 6-8 hours a day should be billable time)
what are the four KPI’s we talked about?
volume: referrals, ADC
net revenues: as % of charge, as well as per visit
expenses/costs: labor cost per UOS and non labor costs per UOS
efficiency: productivity, total paid hours per UOS
