Multiple choice questions on Strategic financial planning.
1. The strategic financial plan rests which of the following?
a.The corporate goals and objectives
b.The facilities plan and construction budget
c.The projected services and activity levels
d.The equity growth rate and debt policy
2. A healthcare organization's debt capacity can be defined in a number of ways. Which of the following is a recognized way in which a healthcare organization should define its debt capacity?
a.Its maximum bank line of credit
b.A ratio of debt to working capital
c.The balance required to fund the capital budget
d.Maximum debt service coverage ability
3. Which of the following analytical techniques is important in the development of a strategic financial plan?
a.Chi-square projections
b.Financial ratio analysis
c.Productivity indexing
d.Cost/benefit ratio analysis
4. Which of the following is the essential first step in defining the growth rate in assets in the financial planning process?
a.Projecting accounts receivable growth
b.Forecasting cash balances
c.Forecasting revenues and expenses
d.Updating the facilities master plan
5. Match the following cost categories with the correct description.
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Cost category
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Cost description
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a. Direct costs
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1. Costs that move in direct proportion to the volume of services provided
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b. Indirect costs
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2. Costs expected to be incurred in providing additional services as a result of a management decision for expansion
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c. Opportunity costs
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3. Costs that can be traced to a given cost object
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d. Incremental costs
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4. Values foregone by using a resource in one way rather than another way
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e. Fixed costs
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5. Costs that can only be traced to a given cost object by arbitrary assignment
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f. Variable costs
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6. Costs that do not change with changes in volume
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6. A technique for quantifying the relationship between volumes, costs, and profits is which of the following?
a.Rate setting analysis
b.Break-even analysis
c.Rate/volume analysis
d. none of the above
7. A provider serves 10,000 patient visits per year and is operating at 50% capacity. The provider's total cost of providing service is $300,000, of which $100,000 is variable. An insurance company has offered the provider a flat rate of $50,000 per year for and additional 2,000 patient visits per year. Which of the following will be TRUE if the provider accepts this offer? Select all that are TRUE.
a.The provider's variable costs will increase
b.The provider's variable costs will decrease
c.The provider's fixed costs will increase
d.The provider's fixed costs will decrease
e.The provider's margin will increase
f.The provider's margin will decrease
8. A provider serves 10,000 patient visits per year with total fixed costs of $200,000 and total variable costs of $100,000. If the provider's average charge is $55.56 per visit and the provider collects 90% of charges, how many patient visits must the provider have to break even?
a.3,600
b.5,000
c.5,400
d.6,000
9. Regional Medical Center generates an average of $4,823 revenue per discharge. It's total operating costs average $4,193 per discharge. The hospital is considering a proposal to reduce drug administration errors through the lease of a new system for pharmaceutical deliveries to the patient units. The lease will cost $5,250 per month. How many additional patients will the hospital need to treat each year to cover the cost of this lease?
a.8.33
b.13.06
c.15.03
d.100
10. County Medical Center has identified $630,000 of fixed cost reductions to be made in the current fiscal year. What effect will the reductions have on operating margin for the year?
a.No effect
b.$630,000 increase
c.$630,000 decrease
d.Cannot be determined with information given