Financial Flashcards
Interest Rate
Typically noted on an annual basis, known as an APR
a. Interest Fee
b. Interest Rate
c. Interest Charges
Accrual based accounting
You purchase a large stock order of HWP for $3,000 in June. You sold all of that HWP in June, July , and August for $6500. This accounting method would show a sales of $6500 and expenses of $3000 which would result in a net profit of $3500 for the month of June. Since sales and purchases count immediately , you can record them on your books immediately and show the actual profit made for the month of June.
a. Cash based accounting
b. Accrual based accounting
Accrual bases Accounting Method
This type of accounting method is able to depreciate assets.
True
True / False
Over time, the revenue and expenses will be the same in both the Cash and Accrual based accounting Method.
Yes!
Annual fixed cost $190 x 100 sq ft = $19,000
Monthly fixed cost $19,000 / 12 = $1583.33
Monthly revenue $9989 - $1583.33 - 525 = $7880.67
Is the Dental Center profitable?
produced revenue of $9989
used 100 sq ft of practice
Annual fixed costs/sq ft $190
Monthly Variable costs of dental center of $525
Profit and Loss Statement
Which Financial Statement is considered the most important for small businesses?
a. Cash Flow Statement
b. Balance Sheet
c. Profit and Loss Statement
Variable
Is staff payroll considered a fixed or variable expense?
Both employer and employee
The Federal Insurance Contribution Act - or FICA - is a payroll tax that is paid by;
a. Employer
b. Employee
c. Both Employer and Employee
Federal Unemployment Tax Act - FUTA
Which payroll tax is paid by employers only and only on the first $7,000 of an employees earnings?
a. State Unemployment Tax Act (SUTA)
b. Federal Unemployment Tax Act (FUTA)
c. Workers Compensation Tax
It is a business identification number assigned by the IRS to identify tax accounts of employers
What is an Employer Identification Number (EIN)
a. It is a number assigned by the Federal Trade Commission in order for the IRS to track revenue earned and taxes paid on that revenue
b. It is a business identification number assigned by the IRS to identify tax accounts of employers
c. It is a federally required identification number assigned by the IRS for purposes of tracking the federal taxes on business earnings.
Balance Sheet
Assets, Liabilities and owner’s Equity are found on;
a. Cash Flow Statement
b. Balance Sheet
c. Income Statement
Income Statement (aka P&L)
Which financial report shows information such as revenue minus expenses and the net income?
a. Cash Flow Statement
b. Balance Sheet
c. Income Statement
Cash Flow Statement
Which financial report illustrates the cash that has been generated minus the cash that has flowed out of the business, and displays the total cash at the end of the year?
a. Cash Flow Statement
b. Balance Sheet
c. Income Statement
3%
AR that are over ____% need intervention to get the entire team to follow an AR policy.
a. 2%
b. 3%
c. 4%
d. 5%
The Fair Debt Collections Practices Act
Which Act prohibits placing “delinquent account” stickers on the outside of an envelope when mailing statements to clients?
a. The Fair Debt Collections Practices Act
b. The Consumer Protection Act
c. The Consumer Confidentiality Act
b. How many times the accounts receivable balance is converted into cash
c. The ratio shows how efficient a company is at collecting its credit sales from customers
What does the account reeivable turnover calculation tell us (multiple choice)?
a. The fiscal health of the practice as it relates to accounts receivable as a percentage of gross revenue.
b. How many times the accounts receivable balance is converted into cash
c. The ratio shows how efficient a company is at collecting it’s credit sales from customers`
Chart of Accounts
It is recommended that practices include on the chart of accounts only those they will use in the normal course of business.
systematic listing of all account names and numbers used by a company.
Profit and Loss Statement
also known as Income statement
This is the core financial report, which covers a specific period of time and reports revenue minus expenses to show the net income during that period.
Balance Sheet
A statement of the financial condition of the practice listing its assets, liabilities, and owners’ equity. It is measured at a specific point in time only.
Cash Flow Statements
Financial sheet that shows where the cash in the practice comes from
Net Income (profit)
This is determined when the expenses are subtracted from the income, with the obvious goal of having a positive number as the result.
b. 10 - 20 % Net Income / Profit
According to the AVMA the average net income a general practice produces in a given year is ___% - ____%. Managers must maximize income and minimize expenses to achieve that goal.
a. 5 - 10%
b. 10 - 20%
c. 20 - 30%
d. 25% or greater
Intangible Property
Non-Physical property that has value. Examples are: Copyrights, goodwill, and non-compete agreements
Tangible Property
Physical property, such as desk, chairs, equipment, computers, and vehicles that have value
c. Profit and Loss Statement (Income Statement)
What is the most important financial report a manager should look at?
a. Balance Sheet
b. Cash Flow Statement
c. Profit and Loss Statement
Assets
This is a list of everything of value owned by the practice - Cash, accounts receivable, and equipment
Current Assets and Fixed / Long Term Assets
What are the two types of Assets?
Current Assets
items that will be consumed within a short period of time, often a year. Ie; general inventory, cash, AR
Fixed or Long Term Assets
items that will be consumed longer than a year and cannot easily be converted to cash. ie; building, land, equipment
Liabilities
These are practice debts (money owed to lenders or other parties) ie: short term such as accounts payable, ,and long term like mortgage on the practice
Equity
this is represented as assets minus liability. In theory; it shows the net worth of the practice.
Net Book Value
Equity is sometimes referred to as this
Cost of Goods Sold COGS
These are the products used to produce a service for the client, or products sold to clients
Budget
An estimate of revenues and expenses for a given period
Fixed Cost/expense
A cost that does not change with the variation in business. Rent, mortgage, and utility costs remain the same regardless of how busy the practice is.
Key Performance Indicators KPI
Statistics that can be generated from client transaction data and reviewed for performance data.
Owner’s equity
Owner’s interest or claim in the practice assets
Principal cost
initial cost of equipment when purchased
Transaction
A purchase that must be recorded
Variable cost / Expense
Any cost that varies with the volume of business for the practice. The costs of medical supplies and drugs increase or decrease depending on the volume of business
Accounting
The art of measuring, communicating and interpreting financial activity
Accrual Accounting
A system that recognizes revenues as earned and expenses as incurred.
Accrual basis method
A system that recognizes income when it is earned and expenses when they are incurred regardless of when the cash is received or disbursed..
Bank Statement
Summary of financial transactions which have occurred over a given period on a bank account
Benchmark
Measurable quantities for a given period of time that are considered industry standards
Benchmarking
The process by which a business compares itself to others
Capital
The rights (equity) of the owners in a business enterprise
Capital Asset
Property of any kind held by an assessee, whether connected with their business or profession or not connected with their business or profession. It includes all kinds of property, movable or immovable, tangible or intangible, fixed or circulating.
Cash Accounting
A system that recognizes income only when cash is collected from a sale, and recognizes expenses when cash is actually paid for goods and services received.
Cash basis
A system that recognizes income when it is received and expenses when they are paid, rather than when the income was earned or expenses was acquired.
Cash Budget
An estimate of cash receipts and disbursements for a specific period of time. Used to determine whether a business has enough money to maintain standard operations. Also helps determine if cash money is being used in unproductive capacities.
Certified Public Accountant CPA
Accounting professional who has attained certification by passing a comprehensive exam, and maintained with continuous professional education, and subscribing to a heightened level of business ethics.
Chartered Accountant CA
Professional has tested and been determined to have the qualifications to audit financial statements and business practices, as well as offer advisory services to clientele.
Checks and Balances
Procedures set in place to reduce mistakes of improper behavior
Commission Pay Garnishments
Any legal or equitable procedure through which some portion of an employee’s earnings is required to be withheld by an employer for the payment of commission based pay on services or products that have not been collected.
Consumer Price Index CPI
An index of prices used to measure the change in the cost of basic goods and services in comparison with a fixed base period.
Cost of Living COL
Theoretical price index that measures relative cost of living over time or regions. It is an index that measures differences in the price of goods and services, and allows for substitutions with other items as prices vary.
Debt
A duty or obligation to pay money, deliver goods, or render services under an express or implied agreement
Depreciation
Systematic allocation of the cost of tangible assets over the time period for which it provides benefit.
Differential Pay
A compensating differential, which is also called compensating wage differential or an equalizing difference, and is defined as the additional amount of income that a given employee must be offered in order to motivate them to accept a given undesirable job.
Dunning Letters
A notification sent to a customer, stating that the customer is overdue in paying an account receivable to the sender.
Embezzlement
The fraudulent appropriation of funds or property entrusted to your care, but actually owned by someone else.
Expenses
Measured outflow of services and or goods, matched to the revenue generated for the outflow
Experience Rating
A system used by insurance companies in the US to set the premium to be paid by the insured on the basis of risk to the company providing the insurance.
Flexible / Variable Expense
Costs that may be manipulated in amount, or eliminated by not engaging in the activity that incurred in the expense.
General Ledger
The collection of all Assets, Liabilities, Equity, Revenue and expense accounts from which the financial statements are derived.
Generally Accepted Accounting Principles GAAP
A framework of accounting standards, rules and procedures defined by the professional accounting industry, which has been adopted by nearly all publicly traded US Corporations
Gross Domestic Product GDP
The total value of goods produced and services provided in a country during one year.
Historical Data
Past periods data, usually used as a basis for forecasting future trends
Imprest Account
A fund or cash reserve that is maintained at a constant level for lengthy periods of time.
Income
A gain or recurrent benefit, usually measured in money.
Income Tax
Tax levied by a government directly on income, especially an annual tax on personal income.
Incorporated
Formed into a legal corporation.
Inflation Rate
The percentage rate at which the general level of prices for goods and services is rising, and subsequently, purchasing power is falling.
Interest Rate
Typically noted on an annual basis, known as the annual percentage rate (APR)
Internal Auditing Controls
Processes in place to provide management reasonable assurance that no practice resources are being lost, that financial reporting is reasonably accurate, and that profitability targets are achieved.
Leasehold Improvements
Enhancements paid for by a tenant to leased space
Limited Liabilities Company LLC
A corporate structure whereby the members of the company are not personally liable for the company’s debts or liabilities
Liquid Assets
Assets that can be converted into cash quickly and with minimal impact to the price received
No-Lo Practice
A veterinary practice with little, to no, profitability
Operating Expenses
The expenses of a business not directly associated with the making of a product, or providing a service, such as administrative, technical or selling expenses.
Paid Time Off PTO
An employee benefit that provides a bank of hours in which the employer pools sick days, vacation and personal days allowing employees to use as they need or desire.
Operating Income
Revenues or income resulting from vet activities and vet related sales, such as pharmacy sales. Does not include non-vet related income such as interest income.
Payroll Tax
Imposed on employers or employees, and are usually calculated as a percentage of the salaries that employers pay their staff.
Practice Management Software PMS
A category of healthcare software that deals with the day to day operations of a vet practice.
Production Pay
Productivity-based pay rewards employees based on measurements of the quantity of work and outputs.
Profit
A financial gain, especially the difference between the amount earned and the amount spent in buying, operating, or producing something
Pro-Forma Budget
A projection or estimate of what may result in the future, given current assumptions and predictions
Rent
A tenant’s regular payment to a landlord for the use of property or land
Return on investment ROI
A measure of profitability used to refer to a single project and expressed as a ratio. Formula = revenue generated divided by the cost of assets consumed for the project
Better explained as income that an investment generates compared with the cost of the investment. It is a measure of how effectively a firm uses its assets to generate profit. 
Revenue
All sales of the practice for goods and services
Salary Compression
When employees in lower-level jobs are paid almost as much as their colleagues in higher-level jobs, including managerial positions.
Sales Tax
A tax on sales or on the receipts from sales.
Shareholders Equity
Shareholders Equity represents the amount by which a practice is financed through common and preferred shares.
A practice’s total assets minus its total liabilities. Equivalently, it is shared capital plus retained earning minus treasury shares.
Statement Reconciliation
A form that allows individuals to compare their personal bank account records to the bank’s records of the individual’s account balance in order to uncover any possible discrepancies
Succession Planning
Succession planning increases the availability of experienced and capable employees that are prepared to assume these roles.
A process for identifying and developing new leaders who can replace old leaders when they leave, retire or die.
Unemployment Taxes
Taxes paid by employers into a federal or state fund to pay benefits to employees who are terminated.
Use Tax
A sales tax on purchases made outside one’s state of residence on taxable items that will be used, stored or consumed in one’s state of residence and on which no tax was collected in the state of purchase.
Straight-line depreciation
the cost of the asset is recognized evenly over its useful life.
Modified Accelerated Cost Recovery System (MACRS)
an accelerated depreciation method required by the US income tax code. The depreciation is accelerated so that more of the cost is recognized in the first several years, and less near the end, of the asset’s useful life.
Variance Analysis
identifies the variance of a financial metric and may help explain why. Example; wage expenses that are significantly over budget will prompt investigation.
A. Cash Based Accounting
Most practices use this method of accounting
a. cash based accounting
b. accrual based accounting
c. open book accounting
a. cash based accounting
This method of accounting Recognizes revenue when cash is RECEIVED and recognizes expenses when they are PAID. This method allows for a more clear vision of day to day operations.
a. cash based accounting
b. accrual based accounting
c. open book accounting
b. accrual based accounting
This method of accounting recognizes revenue when it is EARNED and expenses when they are INCURRED. When goods are used and services are performed.
a. cash based accounting
b. accrual based accounting
c. open book accounting
b. Accrual based accounting
This method of accounting is considered more accurate
a. cash based accounting
b. accrual based accounting
c. open book accounting
c. Monthly
How often should a thorough review of the financial statements be performed
a. daily
b. weekly
c. Monthly
d. quarterly
e. annually
All of the above
Which of the following relate to the purpose of Financial Statements
a. to enable ownership and management to properly review what has happened in the period being measured.
b. Thorough review of the financial statements should be part of the monthly routine of the owner and manager of the practice as well as Key employees and department heads
c. Statements may be segmented by department, for example a separate income statement exclusively for boarding to isolate that department as a “stand-alone” profit center
d. to understand the past performance of the practice, and use past performance as a basis for future trends.
- Reporting
Which one of these is NOT one of the 4 major areas of understanding Financial Statements
1. Theories
2. Purpose
3. Practicality
4. Effect
5. Reporting
b. Net Income
Income from vet services and sales, less the cost of goods and services, results in gross profit. When the additional operating expenses are subtracted from gross profit, the result is _____?
a. Net Expenses
b. Net Income
c. Fixed Income
d. Variable Income
True
True / False
It is important that the P&L sheet is as detailed as possible to aid in determining where inconsistencies may lie by comparing benchmarks
False
Stating expenses as a percentage of revenue is an extremely valuable tool to insure accurate interpretation and comparison to historical performance. Percentages will give a more accurate picture than dollar amounts.
True / False
Stating expenses as a dollar amount of revenue is an extremely valuable tool to insure accurate interpretation and comparison to historical performance. Dollar amounts will give a more accurate picture than percentages.
b. Fixed Expenses
in general they are a set of costs to the hospital and do not fluctuate with how busy the practice may or may not be, are called:
a. Variable Expenses
b. Fixed Expenses
c. Staff Payroll Expense
d. Active Expense
b. Fixed Expense
Rent, most utilities, medical ins and similar expenses that will still be relatively the same no matter the revenue are known as…
a. Variable Expenses
b. Fixed Expenses
c. Staff Payroll Expense
d. Active Expense
b. Fixed Expense
If doctors are paid on salary they are a
a. Variable Expenses
b. Fixed Expenses
c. Staff Payroll Expense
d. Active Expense
a. Variable Expense
this type of expense will change with the amount of business produced by the practice.
a. Variable Expenses
b. Fixed Expenses
c. Staff Payroll Expense
d. Active Expense
b. Utilities
e. Property Tax
Which of the following would NOT be considered a variable expense?
a. COGS
b. Utilities
c. Staff Payroll
d. DVM Wages if on production
e. Property Tax
c. COGS
the largest sector of expenses managers can affect is
a. staff payroll
b. COGS
c. Health Insurance
d. Utilities
False
The balance sheet summarizes assets, liabilities, and equities of the practice at the time of the statement and offers no historical figures
True / False
The balance sheet is a good reference when comparing one period to the next.
c. Balance Sheet
What is also known as the Statement of Financial Condition of the Practice
a. Income Statement
b. Cash Flow Statement
c. Balance Sheet
b. 5-10 days
Reports should be generated within __ - __ days after the ended of the month
a. 1-3
b. 5-10
c. 10-15
Return on capital analysis
this amount is derived by; income / average total assets =
Earnings Before Income, Taxes, Depreciation, and Amortization
What does EBITDA stand for?
Common KPIs include all of the following except;
a. Total revenue and total transaction by month
b. Average transaction charge by month
c. New client and lost clients by month
d. Revenue, transactions, and average transaction charge per DVM per month
e. Revenue by category (vx, lab, etc)
f. Accounts receivable by again classification (30,60,90 days)
g. Staff expenses as percentage of gross income
h. staff turnover rate
Net Profit Margin = practice profit / practice revenue.
What equation Measures simple profit of the practice
Net Profit Margin
This Measures simple profit of the practice. A higher value indicates more revenue that falls to the bottom line instead of being consumed by expenses
GROSS PROFIT MARGIN
Measures how much profit is in a product or service
GROSS PROFIT / REVENUE
What is the equation to calculate Gross Profit Margin?
Practice revenue / practice transactions
What is the equation to calculate Average Transaction Charge
Practice revenue / full time DVMs
What is the formula for calculating Revenue per full time DVM?
credit Sales / Average Accounts receivable.
What is the formula for calculating Accounts Receivable Turn-Over?
After Tax
Relating to income that remains after the deduction of taxes are due
Bonus
Money or an equivalent given in addition to an employee’s usual compensation
Deductions
Business expenses or losses that are legally permitted to be subtracted from the gross revenue from a business when computing its taxable income.
Direct Deposit -
The electronic transfer of a payment directly from the account of the payer to the recipient’s account
Electronic Funds Transfer EFT
The process of moving transactions funds from one bank to another via the Automated Clearing House of Federal Reserve Network
Exempt Worker
An employee who is exempt from minimum wage and OT requirements of the Fair Labor Standards Act FLSA.
Federal Income Tax
A tax levied by the US Internal Revenue Service on the annual earnings of individuals, corporations, trusts and other legal entities.
Hourly Compensation
pay that must include overtime pay for all time worked in excess of 40 hours per week
