Financial Flashcards
Future value
The monetary value of some defined investment at some point in the future, given a specified rate of return
Internal rate of return
Calculated rate of return, given the cost and future value of an investment
Net present value
The net return on a project, given all costs and revenues in terms of the current monetary value
Rate of return
The amount an investment, appreciate, or depreciate overtime, often expressed as a decimal or a percentage
Rate of 72
Isimple method for estimating the time it would take for an investment to double in value given a fixed compounding annual rate of interest
Net present value
Net present value (npv) = PV of all revenues — PV of all costs
Rule of 72 formula
T= (ln n)
———
ln(1+r)
T= number of. Required
n= Increase desired
r= interest rate per period
Liabilities
Practices debts
Net book value
Another name for equity
Cash method
Income is recorded when cash is received, not when the services are performed expenses are recorded when the practice makes a payment, not when the expenses incurred
Summary of chart of accounts
Detailed list of all accounts regularly used in the normal corse of business, including balance sheets and p&l statements
Profit and loss statement
Report detailing revenue expenses to show the net income during that period
Aka income statement
Equity
Assets minus liabilities
Straight line deprecation
Depreciation is recognized evenly over the life of the item
Modified accelerated cost recovery system
System wheee more depreciation is recognized in first few years then less in later years
Method required by US Income tax code
Which system of accounting is considered most accurate
Accrual based
The five characteristics of good financial reporting
- Timeliness
- Accuracy
- Simplicity
- Sufficient detail
- analytical relevance
What financial reports does the typical clinic use?
Balance sheet
Income statement
Statement of cash flows (smaller clinics might not need this)
Cost evaluation
Process of calculating the cost of activities, products or sales
Incremental performance
Breaking down performance by department
The difference between the cost of a product in the revenue is generates is called what
Gross profit margin
If the end of the year revenue for a practice was 2.4 million and your profit was 312,000 what is your net profit margin percentage?
13%
Which expenses are considered more controllable, direct or indirect
Direct expenses are usually more control because they were late directly to specific income production
An organizations debts, or other obligations, which must be discharged within a short time (usually within the earning cycle or what year) are called what?
Current liabilities
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 an is that a healthy number for the practice?
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.
What is the traditional business cycle?
Expansion, prosperity, contraction, recession
What does the economic cycle impact (3)
Consumer confidence
Labor market
Inflation
Which effect the ability to produce revenue
In guard to creating a credit policy what are the two policies that you should begin with?
Client credit policy
Charge account policy
What element should be included in the charge account policy for the practice?
A: the pre-qualification procedures for a client of unknown standing
B: the process for flagging a prequalified client in your practice management system
C: acceptable forms of payment, as well as storage of credit card numbers to be used as a back up guarantee the client agrees to at signing
D: total invoice amount of client can charge without additional approval of management or owners
A. B. D
True or false
A list of procedures to use, when considering ways of extending credit to clients include creating ranges available, credit amount based on the clients longevity with the practice
False
What is the consumer price index?
A list or index of prices use to measure the change in cost of basic goods or services
True or false
The consumer price index can be instrumental in determining the cost of living increase for variety of expenses associated with running a veterinary practice
True
In relation to see analysis, which of the following elements should be included in the calculation?
A. Variable cost per minute.
B. Staff cost per minute.
C. Veterinary cost per minute.
D. Fixed cost per minute.
B. C. D.
Marsha Hinke, DVM states ____% of practices have been victims of fraud or embezzlement
67.8%
True or false
It is recommended that practices do not prosecute, confirmed cases of embezzlement unless the loss is determined to be greater than $2000.
False
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 of the above.
B.
More than __% of gross revenue, as lost to embezzlement in small businesses annually.
5%
In the budgeting process, normalizing the hospitals expenses refers to
A. looking back at the past three years of revenues and expenses.
B. Projecting the next three years expenses.
C. Removing any large one off expenses from years expenses.
D. Averaging the last three years expenses
C. D.
True or False
As long as an employee embezzlement is below $1000, It is not worth prosecuting.
False
When budgeting for start up practice, it is recommended to use the__ percentile of industry benchmarks.
25th
When comparing revenue and expenses, is it more valuable to determine the % change or the $$ change year over year? 
Percentage
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 asses aspects of profitability, solvency and liquidity.
1. Key performance indicators
2. Ratios
3. Percentages
4. contrast parallels
- KPIs
Formula for accounts receivable turnover
Credit sales/ average accounts recivable
Average accounts receivable formula
Beginning accounts receivable + ending accounts receivable/2
Days in accounts receivable formula
Number of days in period/ accounts receivable turnover
What are the five tiers of practice owners compensation?
- Veterinary salaries
- Management salary
- Perquisite income
- Profits reflected as return on investment in the practice
- Equitable distribution of remaining profits among owners
The difference between the cost for product and the revenue it generates is called what?
Gross profit margin
If your end of year revenue for a practice was $2,400,000 and your profit was $312,000, what is your Net Profit Margin?
13%
What expenses are considered considered more controllable, direct expense air indirect expense?
Direct expenses
An organization’s debts or other obligations which must be discharged within a short time (usually the earnings cycle, or one year) are called what?
Current liabilities
If the practice currently has $94,250 I have cash on hand in the annual open expenses of the practice are $1,677,000, how many days cash balance do you have an is that a healthy number for the practice?
14.6.
As a general rule, it is good business practice to keep 20 to 30 days worth of cash on hand to ensure quality issues do not arise
What is common sizing?
If your practice has $3,691,000 in revenue and $2,952,800 in expenses, how would you express the expenses I’m using common sizing?
Once calculated using the metrics above, is your answer considered within the preferred benchmark for expenses?
These represent the determination of financial statement, entry relationships in the fractional structure that provides a concise preference to performance. They are generally used to assess aspects of possibility sovereignty and liquidity
1. KPI
2. Ratios
3. Percentages
4. Contrast parallels
2 ratios.
Pg 16 financial management
Accounting equation
Assets= liabilities + owner equity
Another name for the p&l
Income statement
Another name for the income statement
P&l
Average net income
10-12%
