CHFP Study Set Questions And 100% Correct Answers
Comprehensive Medical Office Budget includes. - Answer 1. Statistics
2. Operating Expenses and Revenues
3. Capital Expenditures
4. Cash Flows
Control Budgets - Answer Three types: 1. Operating Budget
2. Capital Budget
3. Cash Budget
Cleverley's components of a capital project: - Answer 1. Information on alternatives
available
2. Information on resources available
3. Cost data
4. Benefit data
5. Data regarding prior performance
6. Risk projection information
Payback method - Solution How many years it takes to recoup an initial investment
based on new income the investment generates (includes negative cash flow of initial
investment). Does not consider time value of money.
Return on Investment - Solution Net Present Value / Initial Investment
Debt Service - Solution Principal + Interest
,Annual Debt Service - Solution Principal + Interest for a given year
Total Debt Service ANSWER Total of all debt service payments
Joint Venture - Answer Additional source of capital: Pros: Attractive to physician and
for-profit groups as investors; can share the risk; strong organizations can be
successful in the market. Cons: If the deal goes bad, everyone loses money; profits must
be shared; may jeopardize tax-exempt status; Medicare/Medicaid fraud and abuse
claimed
Leases - A contract to pay over time for a capital asset, where ownership is acquired at
some point in the future, rather than at the time the asset is taken into possession.
Capital Lease - Contains a bargain purchase option; transfers ownership at end of term;
term equal to 75% or more of the equipment's useful life; present value of the payments
greater than 90% of the fair market value of the item
Operating Lease - An account wherein the lessee is responsible for the cost over a set
period of time. No ownership at the end. Cumulative Payments may exceed outright
purchase price.
Budgeting Techniques - Answers
High-level strategies and goals must be reduced to department-specific budgets.
Three Components of an operating budget:
Statistical
Revenue
Expense
Variance Types - Answers Volume, Rate, Price, Efficiency
Operating margin (%)- Solution (total operating revenue - total operating expenses) /
total operating revenue
, Return on Assets- Solution Surplus of income over expenses / Total Assets
Excess margin (%)- Solution (total operating revenue - total operating expenses
+ nonoperating revenue) / (total operating revenue + non-operating revenue)
(x) - Solution net revenue available for debt service (usually operating income +
depreciation + interest) / (principal payment + interest expense)
Maintained bed occupancy (%) - Solution (patient days x 100) / (maintained beds x (365
or Days in Per.))
Current ratio (x) - Solution total current assets / total current liabilities
Liquidity indicator shows the number of times short-term obligations can be met from
short-term creditors. Since it provides an indication of ability to pay liabilities, a HIGH
ratio number is one way short-term creditors evaluate their margin of safety.
Days Cash on Hand - Answer ((cash and cash equivalents + board designated funds for
capital) x (365 or Days in Per.)) / (total operating expenses - depreciation and
amortization expenses) Solvency indicator measures # of days an organization could
pay its cash operating expenses if none of the A/R were collected. Shows the minimal
survival period of an organization.
Cushion ratio - Answer (cash and cash equivalents + board designated funds for capital)
/
estimated future peak debt service; A measure of the capital structure of the
organization. This ratio is important in evaluating the financial risk position of an
organization. (High is good)
Accounts receivable days - Answer (NET patient accounts receivable x (365 or Days in
Per.) /
NET patient revenue - A measure of the efficiency of the collections function.
Average payment period (days) -Answer (total current liabilities x (365 or Days in Per.)) /
Comprehensive Medical Office Budget includes. - Answer 1. Statistics
2. Operating Expenses and Revenues
3. Capital Expenditures
4. Cash Flows
Control Budgets - Answer Three types: 1. Operating Budget
2. Capital Budget
3. Cash Budget
Cleverley's components of a capital project: - Answer 1. Information on alternatives
available
2. Information on resources available
3. Cost data
4. Benefit data
5. Data regarding prior performance
6. Risk projection information
Payback method - Solution How many years it takes to recoup an initial investment
based on new income the investment generates (includes negative cash flow of initial
investment). Does not consider time value of money.
Return on Investment - Solution Net Present Value / Initial Investment
Debt Service - Solution Principal + Interest
,Annual Debt Service - Solution Principal + Interest for a given year
Total Debt Service ANSWER Total of all debt service payments
Joint Venture - Answer Additional source of capital: Pros: Attractive to physician and
for-profit groups as investors; can share the risk; strong organizations can be
successful in the market. Cons: If the deal goes bad, everyone loses money; profits must
be shared; may jeopardize tax-exempt status; Medicare/Medicaid fraud and abuse
claimed
Leases - A contract to pay over time for a capital asset, where ownership is acquired at
some point in the future, rather than at the time the asset is taken into possession.
Capital Lease - Contains a bargain purchase option; transfers ownership at end of term;
term equal to 75% or more of the equipment's useful life; present value of the payments
greater than 90% of the fair market value of the item
Operating Lease - An account wherein the lessee is responsible for the cost over a set
period of time. No ownership at the end. Cumulative Payments may exceed outright
purchase price.
Budgeting Techniques - Answers
High-level strategies and goals must be reduced to department-specific budgets.
Three Components of an operating budget:
Statistical
Revenue
Expense
Variance Types - Answers Volume, Rate, Price, Efficiency
Operating margin (%)- Solution (total operating revenue - total operating expenses) /
total operating revenue
, Return on Assets- Solution Surplus of income over expenses / Total Assets
Excess margin (%)- Solution (total operating revenue - total operating expenses
+ nonoperating revenue) / (total operating revenue + non-operating revenue)
(x) - Solution net revenue available for debt service (usually operating income +
depreciation + interest) / (principal payment + interest expense)
Maintained bed occupancy (%) - Solution (patient days x 100) / (maintained beds x (365
or Days in Per.))
Current ratio (x) - Solution total current assets / total current liabilities
Liquidity indicator shows the number of times short-term obligations can be met from
short-term creditors. Since it provides an indication of ability to pay liabilities, a HIGH
ratio number is one way short-term creditors evaluate their margin of safety.
Days Cash on Hand - Answer ((cash and cash equivalents + board designated funds for
capital) x (365 or Days in Per.)) / (total operating expenses - depreciation and
amortization expenses) Solvency indicator measures # of days an organization could
pay its cash operating expenses if none of the A/R were collected. Shows the minimal
survival period of an organization.
Cushion ratio - Answer (cash and cash equivalents + board designated funds for capital)
/
estimated future peak debt service; A measure of the capital structure of the
organization. This ratio is important in evaluating the financial risk position of an
organization. (High is good)
Accounts receivable days - Answer (NET patient accounts receivable x (365 or Days in
Per.) /
NET patient revenue - A measure of the efficiency of the collections function.
Average payment period (days) -Answer (total current liabilities x (365 or Days in Per.)) /
