MHA 706 Financial Management
Midterm Exam Study Guide 2026 — 200
Questions with Verified Answers &
Rationales.
Question 1: What is the primary goal of financial management in
healthcare organizations?
A. Maximize patient satisfaction
B. Minimize costs
C. Maximize the value of the organization
D. Expand market share
Correct Answer: C
Rationale: The primary financial goal is to maximize organizational value,
which ensures long-term sustainability and the ability to provide quality
care. While patient satisfaction, cost minimization, and market expansion
are important, they are means to the end of long-term organizational
viability.
Question 2: Healthcare finance is best defined as:
A. The accounting and financial management principles and practices used
within health services organizations to ensure the financial well-being of
the enterprise
B. The process of billing patients for services rendered
C. The management of clinical outcomes and quality metrics
D. The study of healthcare policy and regulation
Correct Answer: A
,Rationale: Healthcare finance encompasses the accounting and financial
management principles and practices used within health services
organizations to ensure the financial well-being of the enterprise. It is
broader than billing or clinical management.
Question 3: Which of the following statements about finance, accounting,
and financial management is most correct?
A. Accounting is of no value in decision making
B. Financial management provides the theory, concepts, and tools
necessary to help managers make better financial decisions
C. Accounting and financial management are completely independent
functions
D. Financial management focuses solely on external reporting
Correct Answer: B
Rationale: Financial management provides the theory, concepts, and tools
necessary to help managers make better financial decisions. Accounting
concerns the recording of economic events, while financial management
uses that data for internal decision-making.
Question 4: The primary role of finance in a healthcare organization is to:
A. Oversee patient care delivery
B. Plan for, acquire, and use resources to maximize the efficiency and value
of the enterprise
C. Ensure compliance with clinical protocols
D. Manage human resources
Correct Answer: B
Rationale: The primary role of finance is to plan for, acquire, and use
resources to maximize the efficiency and value of the enterprise. This
,encompasses planning, budgeting, financial reporting, capital investment
decisions, financing decisions, working capital management, contract
management, and financial risk management.
Question 5: 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. How much cash should the firm keep in reserve?
D. Should the firm borrow money for five or ten years?
Correct Answer: C
Rationale: Working capital management focuses on maintaining efficient
levels of current assets and current liabilities. Determining how much cash
to keep in reserve is a classic working capital decision. The other options
relate to capital structure or financing decisions.
Question 6: 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
Correct Answer: B
Rationale: Capital structure decisions involve determining the mix of debt
and equity financing. Establishing the preferred debt-equity level is a
capital structure decision. Inventory levels and credit terms are working
capital decisions, while equipment selection is a capital budgeting decision.
Question 7: 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
Correct Answer: C
Rationale: Working capital management involves managing current assets
and current liabilities. Determining which customers will be granted credit is
a working capital decision because it directly affects accounts receivable.
The other options relate to capital budgeting or capital structure.
Question 8: 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
Correct Answer: B
Rationale: Working capital (current assets minus current liabilities) is the
primary focus of daily financial operations. Effective working capital
management ensures the organization can meet its short-term obligations
while operating efficiently.
Question 9: 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
Midterm Exam Study Guide 2026 — 200
Questions with Verified Answers &
Rationales.
Question 1: What is the primary goal of financial management in
healthcare organizations?
A. Maximize patient satisfaction
B. Minimize costs
C. Maximize the value of the organization
D. Expand market share
Correct Answer: C
Rationale: The primary financial goal is to maximize organizational value,
which ensures long-term sustainability and the ability to provide quality
care. While patient satisfaction, cost minimization, and market expansion
are important, they are means to the end of long-term organizational
viability.
Question 2: Healthcare finance is best defined as:
A. The accounting and financial management principles and practices used
within health services organizations to ensure the financial well-being of
the enterprise
B. The process of billing patients for services rendered
C. The management of clinical outcomes and quality metrics
D. The study of healthcare policy and regulation
Correct Answer: A
,Rationale: Healthcare finance encompasses the accounting and financial
management principles and practices used within health services
organizations to ensure the financial well-being of the enterprise. It is
broader than billing or clinical management.
Question 3: Which of the following statements about finance, accounting,
and financial management is most correct?
A. Accounting is of no value in decision making
B. Financial management provides the theory, concepts, and tools
necessary to help managers make better financial decisions
C. Accounting and financial management are completely independent
functions
D. Financial management focuses solely on external reporting
Correct Answer: B
Rationale: Financial management provides the theory, concepts, and tools
necessary to help managers make better financial decisions. Accounting
concerns the recording of economic events, while financial management
uses that data for internal decision-making.
Question 4: The primary role of finance in a healthcare organization is to:
A. Oversee patient care delivery
B. Plan for, acquire, and use resources to maximize the efficiency and value
of the enterprise
C. Ensure compliance with clinical protocols
D. Manage human resources
Correct Answer: B
Rationale: The primary role of finance is to plan for, acquire, and use
resources to maximize the efficiency and value of the enterprise. This
,encompasses planning, budgeting, financial reporting, capital investment
decisions, financing decisions, working capital management, contract
management, and financial risk management.
Question 5: 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. How much cash should the firm keep in reserve?
D. Should the firm borrow money for five or ten years?
Correct Answer: C
Rationale: Working capital management focuses on maintaining efficient
levels of current assets and current liabilities. Determining how much cash
to keep in reserve is a classic working capital decision. The other options
relate to capital structure or financing decisions.
Question 6: 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
Correct Answer: B
Rationale: Capital structure decisions involve determining the mix of debt
and equity financing. Establishing the preferred debt-equity level is a
capital structure decision. Inventory levels and credit terms are working
capital decisions, while equipment selection is a capital budgeting decision.
Question 7: 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
Correct Answer: C
Rationale: Working capital management involves managing current assets
and current liabilities. Determining which customers will be granted credit is
a working capital decision because it directly affects accounts receivable.
The other options relate to capital budgeting or capital structure.
Question 8: 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
Correct Answer: B
Rationale: Working capital (current assets minus current liabilities) is the
primary focus of daily financial operations. Effective working capital
management ensures the organization can meet its short-term obligations
while operating efficiently.
Question 9: 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
