LSUS MHA 706 MIDTERM EXAM COMPREHENSIVE STUDY
GUIDE
200 EXAM QUESTIONS COVERING ALL TESTED TOPICS
1. What is the primary role of finance in a healthcare organization?
a) To minimize tax liabilities through aggressive accounting
b) To plan for, acquire, and utilize resources to maximize efficiency and
value of the enterprise
c) To ensure all patient bills are paid in full within 30 days
d) To maintain the building and facilities in good condition
e) To hire and train all clinical staff
Correct Answer: b) To plan for, acquire, and utilize resources to
maximize efficiency and value of the enterprise
Rationale: The primary role of finance is strategic resource management
to maximize organizational efficiency and value, not merely operational
tasks like billing or facilities management .
2. Which of the following is a working capital decision?
a) How should the firm raise additional capital to fund its expansion?
b) What debt-equity ratio is best suited to the firm?
c) What is the cost of debt financing?
d) Should the firm borrow money for five or ten years?
e) How much cash should the firm keep in reserve?
Correct Answer: e) How much cash should the firm keep in reserve?
Rationale: Working capital decisions involve managing short-term assets
,and liabilities, including cash reserves, inventory, and accounts
receivable.
3. Which one of the following is a capital structure decision?
a) Determining the optimal inventory level
b) Establishing the preferred debt-equity level
c) Selecting new equipment to purchase
d) Setting the terms of sale for credit sales
e) Determining when suppliers should be paid
Correct Answer: b) Establishing the preferred debt-equity level
Rationale: Capital structure decisions concern how a firm finances its
operations through a mix of debt and equity.
4. Working capital management includes which one of the following?
a) Deciding which new projects to accept
b) Deciding whether to purchase a new machine or fix a currently
owned machine
c) Determining which customers will be granted credit
d) Determining how many new shares of stock should be issued
e) Establishing the target debt-equity ratio
Correct Answer: c) Determining which customers will be granted
credit
Rationale: Working capital management involves managing short-term
assets and liabilities, including credit policies for customers.
,5. The daily financial operations of a firm are primarily controlled by
managing the:
a) Total debt level
b) Working capital
c) Capital structure
d) Capital budget
e) Long-term liabilities
Correct Answer: b) Working capital
Rationale: Day-to-day financial operations focus on managing working
capital—current assets and current liabilities.
6. One advantage of the corporate form of organization is the:
a) Taxation of the corporate profits
b) Unlimited liability for its shareholders
c) Double taxation of profits
d) Ability to raise larger sums of equity capital than other organizational
forms
e) Ease of formation compared to other organizational forms
Correct Answer: d) Ability to raise larger sums of equity capital than
other organizational forms
Rationale: Corporations can issue stock to raise capital from many
investors, providing access to larger equity funding sources than
proprietorships or partnerships.
7. The Sarbanes-Oxley Act of 2002 has:
a) Reduced the annual compliance costs of all publicly traded firms in
the U.S.
, b) Decreased senior management's involvement in the corporate
annual report
c) Greatly increased the number of U.S. firms that are going public for
the first time
d) Decreased the number of U.S. firms going public on foreign
exchanges
e) Essentially made officers of publicly traded firms personally
responsible for the firm's financial statements
Correct Answer: e) Essentially made officers of publicly traded firms
personally responsible for the firm's financial statements
Rationale: SOX requires corporate officers to certify the accuracy of
financial statements, making them personally liable for
misrepresentations.
8. The primary goal of financial management is most associated with
increasing the:
a) Dollar amount of each sale
b) Traffic flow within the firm's stores
c) Fixed costs while lowering the variable costs
d) Firm's liquidity
e) Market value of the firm
Correct Answer: e) Market value of the firm
Rationale: The primary goal of financial management is shareholder
wealth maximization, reflected in the firm's market value.
9. Which one of the following best describes the primary intent of the
Sarbanes-Oxley Act of 2002?
GUIDE
200 EXAM QUESTIONS COVERING ALL TESTED TOPICS
1. What is the primary role of finance in a healthcare organization?
a) To minimize tax liabilities through aggressive accounting
b) To plan for, acquire, and utilize resources to maximize efficiency and
value of the enterprise
c) To ensure all patient bills are paid in full within 30 days
d) To maintain the building and facilities in good condition
e) To hire and train all clinical staff
Correct Answer: b) To plan for, acquire, and utilize resources to
maximize efficiency and value of the enterprise
Rationale: The primary role of finance is strategic resource management
to maximize organizational efficiency and value, not merely operational
tasks like billing or facilities management .
2. Which of the following is a working capital decision?
a) How should the firm raise additional capital to fund its expansion?
b) What debt-equity ratio is best suited to the firm?
c) What is the cost of debt financing?
d) Should the firm borrow money for five or ten years?
e) How much cash should the firm keep in reserve?
Correct Answer: e) How much cash should the firm keep in reserve?
Rationale: Working capital decisions involve managing short-term assets
,and liabilities, including cash reserves, inventory, and accounts
receivable.
3. Which one of the following is a capital structure decision?
a) Determining the optimal inventory level
b) Establishing the preferred debt-equity level
c) Selecting new equipment to purchase
d) Setting the terms of sale for credit sales
e) Determining when suppliers should be paid
Correct Answer: b) Establishing the preferred debt-equity level
Rationale: Capital structure decisions concern how a firm finances its
operations through a mix of debt and equity.
4. Working capital management includes which one of the following?
a) Deciding which new projects to accept
b) Deciding whether to purchase a new machine or fix a currently
owned machine
c) Determining which customers will be granted credit
d) Determining how many new shares of stock should be issued
e) Establishing the target debt-equity ratio
Correct Answer: c) Determining which customers will be granted
credit
Rationale: Working capital management involves managing short-term
assets and liabilities, including credit policies for customers.
,5. The daily financial operations of a firm are primarily controlled by
managing the:
a) Total debt level
b) Working capital
c) Capital structure
d) Capital budget
e) Long-term liabilities
Correct Answer: b) Working capital
Rationale: Day-to-day financial operations focus on managing working
capital—current assets and current liabilities.
6. One advantage of the corporate form of organization is the:
a) Taxation of the corporate profits
b) Unlimited liability for its shareholders
c) Double taxation of profits
d) Ability to raise larger sums of equity capital than other organizational
forms
e) Ease of formation compared to other organizational forms
Correct Answer: d) Ability to raise larger sums of equity capital than
other organizational forms
Rationale: Corporations can issue stock to raise capital from many
investors, providing access to larger equity funding sources than
proprietorships or partnerships.
7. The Sarbanes-Oxley Act of 2002 has:
a) Reduced the annual compliance costs of all publicly traded firms in
the U.S.
, b) Decreased senior management's involvement in the corporate
annual report
c) Greatly increased the number of U.S. firms that are going public for
the first time
d) Decreased the number of U.S. firms going public on foreign
exchanges
e) Essentially made officers of publicly traded firms personally
responsible for the firm's financial statements
Correct Answer: e) Essentially made officers of publicly traded firms
personally responsible for the firm's financial statements
Rationale: SOX requires corporate officers to certify the accuracy of
financial statements, making them personally liable for
misrepresentations.
8. The primary goal of financial management is most associated with
increasing the:
a) Dollar amount of each sale
b) Traffic flow within the firm's stores
c) Fixed costs while lowering the variable costs
d) Firm's liquidity
e) Market value of the firm
Correct Answer: e) Market value of the firm
Rationale: The primary goal of financial management is shareholder
wealth maximization, reflected in the firm's market value.
9. Which one of the following best describes the primary intent of the
Sarbanes-Oxley Act of 2002?
