MHA 705 Module 6 Exam – Questions and
Verified Answers (A+ Graded)
MHA 705 Module 6 Exam – 100 Questions
and Verified Answers
1. What is the primary goal of financial management in a not-for-profit healthcare
organization?
A) Maximize shareholder wealth
B) Maximize patient volume
C) Ensure financial viability to fulfill the mission
D) Minimize employee salaries
2. Which financial statement provides a snapshot of an organization's financial position at a
specific point in time?
A) Statement of Operations
B) Balance Sheet
C) Statement of Cash Flows
D) Statement of Changes in Net Assets
3. The formula for the Current Ratio is:
A) Total Liabilities / Total Assets
B) Current Assets / Current Liabilities
C) Cash / Current Liabilities
D) (Current Assets - Inventory) / Current Liabilities
4. What does a Days Cash on Hand ratio measure?
A) How quickly patients pay their bills
B) The number of days an organization can operate using only its cash and cash equivalents
C) The average collection period for receivables
D) The efficiency of inventory management
5. Which of the following is considered a current asset?
A) Land
B) Building
,C) Accounts Receivable
D) Long-term Debt
6. Depreciation expense is found on which financial statement?
A) Balance Sheet
B) Statement of Operations (Income Statement)
C) Statement of Cash Flows
D) Statement of Fund Balance
7. The primary purpose of a operating budget is to:
A) Plan for the acquisition of major equipment
B) Detail the organization's long-term strategic goals
C) Plan for daily revenues and expenses
D) Forecast cash inflows and outflows
8. What type of budget is used for planning the purchase of major, long-lasting assets?
A) Operating Budget
B) Cash Budget
C) Capital Budget
D) Flexible Budget
9. Variance analysis is used to:
A) Compare actual financial results to the budget
B) Determine the cost of services
C) Calculate patient satisfaction scores
D) Allocate overhead costs
10. A favorable variance in expenses occurs when:
A) Actual expenses are higher than budgeted
B) Actual revenues are lower than budgeted
C) Actual expenses are lower than budgeted
D) Actual volumes are higher than budgeted
11. What is the primary source of operating revenue for most hospitals?
A) Philanthropic donations
B) Government grants
C) Patient service revenue (from payers)
D) Investment income
12. The process of determining the cost of a specific service, such as a knee replacement, is
known as:
, A) Cost Allocation
B) Cost Accounting
C) Variance Analysis
D) Capital Budgeting
13. Which of the following is a direct cost for a hospital's radiology department?
A) CEO's salary
B) Cost of X-ray film
C) Hospital utilities
D) Human Resources department costs
14. The method of cost allocation that assigns costs from service departments to revenue-
producing departments is called:
A) Direct Allocation Method
B) Step-Down Allocation Method
C) Activity-Based Costing
D) Cost-to-Charge Ratio
15. What does RVU (Relative Value Unit) measure in healthcare costing?
A) Patient satisfaction
B) The relative level of resources required for a procedure
C) The market share of a service
D) The price of a drug
16. A payment system where a fixed amount is paid per patient for all care provided over a
specific period is called:
A) Fee-for-Service
B) Capitation
C) Discounted Fee-for-Service
D) Diagnosis-Related Group (DRG)
17. Under a DRG-based payment system, a hospital is incentivized to:
A) Provide more services to increase revenue
B) Reduce the cost per episode of care
C) Increase the length of patient stay
D) Focus exclusively on high-cost procedures
18. Which of the following is a characteristic of a fixed cost?
A) It varies directly with patient volume
B) It remains constant in total, regardless of volume
Verified Answers (A+ Graded)
MHA 705 Module 6 Exam – 100 Questions
and Verified Answers
1. What is the primary goal of financial management in a not-for-profit healthcare
organization?
A) Maximize shareholder wealth
B) Maximize patient volume
C) Ensure financial viability to fulfill the mission
D) Minimize employee salaries
2. Which financial statement provides a snapshot of an organization's financial position at a
specific point in time?
A) Statement of Operations
B) Balance Sheet
C) Statement of Cash Flows
D) Statement of Changes in Net Assets
3. The formula for the Current Ratio is:
A) Total Liabilities / Total Assets
B) Current Assets / Current Liabilities
C) Cash / Current Liabilities
D) (Current Assets - Inventory) / Current Liabilities
4. What does a Days Cash on Hand ratio measure?
A) How quickly patients pay their bills
B) The number of days an organization can operate using only its cash and cash equivalents
C) The average collection period for receivables
D) The efficiency of inventory management
5. Which of the following is considered a current asset?
A) Land
B) Building
,C) Accounts Receivable
D) Long-term Debt
6. Depreciation expense is found on which financial statement?
A) Balance Sheet
B) Statement of Operations (Income Statement)
C) Statement of Cash Flows
D) Statement of Fund Balance
7. The primary purpose of a operating budget is to:
A) Plan for the acquisition of major equipment
B) Detail the organization's long-term strategic goals
C) Plan for daily revenues and expenses
D) Forecast cash inflows and outflows
8. What type of budget is used for planning the purchase of major, long-lasting assets?
A) Operating Budget
B) Cash Budget
C) Capital Budget
D) Flexible Budget
9. Variance analysis is used to:
A) Compare actual financial results to the budget
B) Determine the cost of services
C) Calculate patient satisfaction scores
D) Allocate overhead costs
10. A favorable variance in expenses occurs when:
A) Actual expenses are higher than budgeted
B) Actual revenues are lower than budgeted
C) Actual expenses are lower than budgeted
D) Actual volumes are higher than budgeted
11. What is the primary source of operating revenue for most hospitals?
A) Philanthropic donations
B) Government grants
C) Patient service revenue (from payers)
D) Investment income
12. The process of determining the cost of a specific service, such as a knee replacement, is
known as:
, A) Cost Allocation
B) Cost Accounting
C) Variance Analysis
D) Capital Budgeting
13. Which of the following is a direct cost for a hospital's radiology department?
A) CEO's salary
B) Cost of X-ray film
C) Hospital utilities
D) Human Resources department costs
14. The method of cost allocation that assigns costs from service departments to revenue-
producing departments is called:
A) Direct Allocation Method
B) Step-Down Allocation Method
C) Activity-Based Costing
D) Cost-to-Charge Ratio
15. What does RVU (Relative Value Unit) measure in healthcare costing?
A) Patient satisfaction
B) The relative level of resources required for a procedure
C) The market share of a service
D) The price of a drug
16. A payment system where a fixed amount is paid per patient for all care provided over a
specific period is called:
A) Fee-for-Service
B) Capitation
C) Discounted Fee-for-Service
D) Diagnosis-Related Group (DRG)
17. Under a DRG-based payment system, a hospital is incentivized to:
A) Provide more services to increase revenue
B) Reduce the cost per episode of care
C) Increase the length of patient stay
D) Focus exclusively on high-cost procedures
18. Which of the following is a characteristic of a fixed cost?
A) It varies directly with patient volume
B) It remains constant in total, regardless of volume
