NAB RCAL (Residential Care/Assisted Living) Exam| Questions and Verified
Answers| 100% Correct| Grade A+ Assured
Question 1
In financial management of an assisted living facility, at what specific point is the "Breakeven
Point" achieved?
A) When Net Operating Income exceeds total liabilities.
B) When total revenue is equal to total costs.
C) When the occupancy rate reaches 95%.
D) When cash flow becomes positive after depreciation.
E) When EBITDA is exactly double the interest expense.
Correct Answer: B) total revenue = total costs
Rationale: The breakeven point is the critical threshold in financial analysis where the
organization neither makes a profit nor suffers a loss. For an RCAL administrator,
identifying this point helps determine the minimum occupancy rate required to cover all
fixed and variable expenses before generating profit.
Question 2
An administrator is reviewing the facility's liquidity to ensure they can meet short-term
obligations. Which formula should be used to calculate the "Working Capital Ratio"?
A) (Cash + Accounts Receivable) / Total Liabilities
B) Current Assets / Current Liabilities
C) Total Assets / Total Liabilities
D) Net Operating Income / Operating Expenses
E) Current Assets - Current Liabilities
Correct Answer: B) current assets / current liabilities
Rationale: The Working Capital Ratio (also known as the Current Ratio) measures a
facility's ability to pay off its short-term debts (due within a year) with its short-term
assets. A ratio below 1.0 typically indicates potential liquidity problems that could hinder
daily operations.
Question 3
Which financial metric provides the most stringent test of a facility's immediate liquidity by
excluding inventory and other less-liquid current assets?
A) Working Capital Ratio
B) Debt to Assets Ratio
C) Acid-test (Quick) Ratio
D) Profit Margin
E) Interest Coverage Ratio
Correct Answer: C) Acid-test (quick) ratio
Rationale: The Acid-test ratio is calculated as (Cash + Accounts Receivable + Short-term
, 2
Investments) / Current Liabilities. It is considered a "stricter" version of the current ratio
because it ignores assets that cannot be converted to cash immediately (like food or medical
supply inventory), providing a more "realistic" view of immediate cash availability.
Question 4
To determine the percentage of the facility's assets that are financed by creditors, the
administrator should calculate the:
A) Profit Margin
B) Debt to Assets Ratio
C) EBITDA
D) Return on Equity
E) Revenue Cycle Management
Correct Answer: B) total liabilities / total assets
Rationale: The Debt to Assets ratio shows the proportion of a facility's assets that are
funded through debt rather than equity. A high ratio indicates that the facility is highly
leveraged, which may increase financial risk during periods of low occupancy.
Question 5
A facility has four employees working the following hours in a week: 12, 14, 40, and 30. Using a
standard 40-hour workweek, what is the Full-Time Equivalent (FTE) count for this group?
A) 2.0 FTE
B) 2.4 FTE
C) 2.45 FTE
D) 3.0 FTE
E) 4.0 FTE
Correct Answer: B) 2.4 FTE
Rationale: FTE is calculated by taking the total number of hours worked by all employees
(12 + 14 + 40 + 30 = 96) and dividing by the standard 40-hour week ( = 2.4). This
metric allows administrators to standardize labor costs and staffing patterns regardless of
whether employees are part-time or full-time.
Question 6
Which financial term describes "income to sales" and is calculated by dividing Net Operating
Income (NOI) by Total Revenue?
A) Return on Investment
B) Debt Service Ratio
C) Profit Margin
D) Operating Expense Ratio
E) Yield Ratio
, 3
Correct Answer: C) Profit margin
Rationale: Profit margin measures how much of every dollar of revenue is kept as profit. In
the RCAL world, monitoring both gross and net profit margins is essential to evaluate if
the pricing of resident care is sufficient to cover the operational costs and provide a return
to stakeholders.
Question 7
How is Net Operating Income (NOI) specifically calculated?
A) Total Assets - Total Liabilities
B) Total (Gross) Revenue - Operating Expenses
C) EBITDA + Depreciation
D) Cash Receipts - Cash Disbursements
E) Total Revenue / Occupancy Rate
Correct Answer: B) Total (gross) Revenue - operating expenses
Rationale: NOI is a fundamental measure of a facility’s core operational profitability. It
excludes non-operating costs like taxes and interest. This allows administrators to see how
well the facility is performing based purely on its ability to manage resident revenue
against daily operating costs.
Question 8
A facility with 100 licensed beds records a total of 2,500 resident days in a 30-day month. What
formula is used to determine the "Occupancy Rate"?
A) (Total Revenue / Total Beds) x 100
B) (# of resident days / facility beds) x 365
C) (Actual residents / Total beds) / 30
D) (Resident days / Potential resident days) x 100
E) (FTE / Total Beds) x 365
Correct Answer: B) (# of resident days/facility beds) x 365 (Note: Formula provided in notes
uses annual standard)
Rationale: Occupancy rate is a key performance indicator. While the provided note uses an
annual calculation (# of resident days / total possible days in year), the core concept is
comparing the actual days of care provided against the maximum capacity of the facility
over a specific period.
Question 9
The Occupational Safety and Health Administration (OSHA) requires employers to inform
workers about potentially hazardous chemicals through which specific standard?
A) NFPA Life Safety Code
B) Hazard Communication Standard (HCS)
C) Patient Self-Determination Act
, 4
D) Sarbanes-Oxley Act
E) General Duty Clause
Correct Answer: B) Hazard Communication Standard. OSHA standard requiring employers
to inform workers of potentially hazardous chemicals.
Rationale: Commonly known as the "Right to Know" law, the HCS ensures that employees
are provided with Safety Data Sheets (SDS) and proper labeling for all chemicals (cleaners,
disinfectants, etc.) used in the facility to prevent accidental injury or exposure.
Question 10
Which of the following represents the fundamental formula for a facility's "Balance Sheet"?
A) Revenue - Expenses = Profit
B) Assets = Liabilities + Shareholders' Equity
C) Assets - Liabilities = EBITDA
D) Cash In - Cash Out = Cash Flow
E) Total Assets + Total Liabilities = Net Worth
Correct Answer: B) Assets = Liabilities + Shareholders Equity
Rationale: The Balance Sheet provides a "snapshot" of a company's financial position at a
single point in time. It must always "balance," meaning all the things the facility owns
(Assets) were paid for by either borrowing money (Liabilities) or using the owners' own
money (Equity).
Question 11
What does the financial acronym "EBITDA" represent?
A) Expenses Before Interest, Taxes, Delivery, and Audits
B) Earnings Before Insurance, Total Debt, and Amortization
C) Earnings Before Interest, Taxes, Depreciation, and Amortization
D) Every Budget Item Tracked During Audits
E) Estimated Balance Including Total Debt and Assets
Correct Answer: C) Earnings before interest, taxes, depreciation, and amortization
Rationale: EBITDA is used to analyze and compare profitability between different
companies and industries because it eliminates the effects of financing and accounting
decisions. It is a "pure" look at the facility's cash-generating ability from operations.
Question 12
In financial accounting, "Amortization" is best defined as:
A) The increase in asset value due to inflation.
B) The reduction of a loan balance through payments made over a period of time.
C) The process of hiring new staff to replace retirees.
Answers| 100% Correct| Grade A+ Assured
Question 1
In financial management of an assisted living facility, at what specific point is the "Breakeven
Point" achieved?
A) When Net Operating Income exceeds total liabilities.
B) When total revenue is equal to total costs.
C) When the occupancy rate reaches 95%.
D) When cash flow becomes positive after depreciation.
E) When EBITDA is exactly double the interest expense.
Correct Answer: B) total revenue = total costs
Rationale: The breakeven point is the critical threshold in financial analysis where the
organization neither makes a profit nor suffers a loss. For an RCAL administrator,
identifying this point helps determine the minimum occupancy rate required to cover all
fixed and variable expenses before generating profit.
Question 2
An administrator is reviewing the facility's liquidity to ensure they can meet short-term
obligations. Which formula should be used to calculate the "Working Capital Ratio"?
A) (Cash + Accounts Receivable) / Total Liabilities
B) Current Assets / Current Liabilities
C) Total Assets / Total Liabilities
D) Net Operating Income / Operating Expenses
E) Current Assets - Current Liabilities
Correct Answer: B) current assets / current liabilities
Rationale: The Working Capital Ratio (also known as the Current Ratio) measures a
facility's ability to pay off its short-term debts (due within a year) with its short-term
assets. A ratio below 1.0 typically indicates potential liquidity problems that could hinder
daily operations.
Question 3
Which financial metric provides the most stringent test of a facility's immediate liquidity by
excluding inventory and other less-liquid current assets?
A) Working Capital Ratio
B) Debt to Assets Ratio
C) Acid-test (Quick) Ratio
D) Profit Margin
E) Interest Coverage Ratio
Correct Answer: C) Acid-test (quick) ratio
Rationale: The Acid-test ratio is calculated as (Cash + Accounts Receivable + Short-term
, 2
Investments) / Current Liabilities. It is considered a "stricter" version of the current ratio
because it ignores assets that cannot be converted to cash immediately (like food or medical
supply inventory), providing a more "realistic" view of immediate cash availability.
Question 4
To determine the percentage of the facility's assets that are financed by creditors, the
administrator should calculate the:
A) Profit Margin
B) Debt to Assets Ratio
C) EBITDA
D) Return on Equity
E) Revenue Cycle Management
Correct Answer: B) total liabilities / total assets
Rationale: The Debt to Assets ratio shows the proportion of a facility's assets that are
funded through debt rather than equity. A high ratio indicates that the facility is highly
leveraged, which may increase financial risk during periods of low occupancy.
Question 5
A facility has four employees working the following hours in a week: 12, 14, 40, and 30. Using a
standard 40-hour workweek, what is the Full-Time Equivalent (FTE) count for this group?
A) 2.0 FTE
B) 2.4 FTE
C) 2.45 FTE
D) 3.0 FTE
E) 4.0 FTE
Correct Answer: B) 2.4 FTE
Rationale: FTE is calculated by taking the total number of hours worked by all employees
(12 + 14 + 40 + 30 = 96) and dividing by the standard 40-hour week ( = 2.4). This
metric allows administrators to standardize labor costs and staffing patterns regardless of
whether employees are part-time or full-time.
Question 6
Which financial term describes "income to sales" and is calculated by dividing Net Operating
Income (NOI) by Total Revenue?
A) Return on Investment
B) Debt Service Ratio
C) Profit Margin
D) Operating Expense Ratio
E) Yield Ratio
, 3
Correct Answer: C) Profit margin
Rationale: Profit margin measures how much of every dollar of revenue is kept as profit. In
the RCAL world, monitoring both gross and net profit margins is essential to evaluate if
the pricing of resident care is sufficient to cover the operational costs and provide a return
to stakeholders.
Question 7
How is Net Operating Income (NOI) specifically calculated?
A) Total Assets - Total Liabilities
B) Total (Gross) Revenue - Operating Expenses
C) EBITDA + Depreciation
D) Cash Receipts - Cash Disbursements
E) Total Revenue / Occupancy Rate
Correct Answer: B) Total (gross) Revenue - operating expenses
Rationale: NOI is a fundamental measure of a facility’s core operational profitability. It
excludes non-operating costs like taxes and interest. This allows administrators to see how
well the facility is performing based purely on its ability to manage resident revenue
against daily operating costs.
Question 8
A facility with 100 licensed beds records a total of 2,500 resident days in a 30-day month. What
formula is used to determine the "Occupancy Rate"?
A) (Total Revenue / Total Beds) x 100
B) (# of resident days / facility beds) x 365
C) (Actual residents / Total beds) / 30
D) (Resident days / Potential resident days) x 100
E) (FTE / Total Beds) x 365
Correct Answer: B) (# of resident days/facility beds) x 365 (Note: Formula provided in notes
uses annual standard)
Rationale: Occupancy rate is a key performance indicator. While the provided note uses an
annual calculation (# of resident days / total possible days in year), the core concept is
comparing the actual days of care provided against the maximum capacity of the facility
over a specific period.
Question 9
The Occupational Safety and Health Administration (OSHA) requires employers to inform
workers about potentially hazardous chemicals through which specific standard?
A) NFPA Life Safety Code
B) Hazard Communication Standard (HCS)
C) Patient Self-Determination Act
, 4
D) Sarbanes-Oxley Act
E) General Duty Clause
Correct Answer: B) Hazard Communication Standard. OSHA standard requiring employers
to inform workers of potentially hazardous chemicals.
Rationale: Commonly known as the "Right to Know" law, the HCS ensures that employees
are provided with Safety Data Sheets (SDS) and proper labeling for all chemicals (cleaners,
disinfectants, etc.) used in the facility to prevent accidental injury or exposure.
Question 10
Which of the following represents the fundamental formula for a facility's "Balance Sheet"?
A) Revenue - Expenses = Profit
B) Assets = Liabilities + Shareholders' Equity
C) Assets - Liabilities = EBITDA
D) Cash In - Cash Out = Cash Flow
E) Total Assets + Total Liabilities = Net Worth
Correct Answer: B) Assets = Liabilities + Shareholders Equity
Rationale: The Balance Sheet provides a "snapshot" of a company's financial position at a
single point in time. It must always "balance," meaning all the things the facility owns
(Assets) were paid for by either borrowing money (Liabilities) or using the owners' own
money (Equity).
Question 11
What does the financial acronym "EBITDA" represent?
A) Expenses Before Interest, Taxes, Delivery, and Audits
B) Earnings Before Insurance, Total Debt, and Amortization
C) Earnings Before Interest, Taxes, Depreciation, and Amortization
D) Every Budget Item Tracked During Audits
E) Estimated Balance Including Total Debt and Assets
Correct Answer: C) Earnings before interest, taxes, depreciation, and amortization
Rationale: EBITDA is used to analyze and compare profitability between different
companies and industries because it eliminates the effects of financing and accounting
decisions. It is a "pure" look at the facility's cash-generating ability from operations.
Question 12
In financial accounting, "Amortization" is best defined as:
A) The increase in asset value due to inflation.
B) The reduction of a loan balance through payments made over a period of time.
C) The process of hiring new staff to replace retirees.
