MHA 706 Financial Management Final
Exam Practice Questions And Correct
Answers (Verified Answers) Plus
Rationales 2026 Q&A | Instant
Download Pdf
1. The primary goal of financial management in healthcare organizations
is to:
A. Minimize expenses
B. Maximize profit
C. Ensure long-term financial stability and value creation
D. Reduce patient wait times
Answer: Ensure long-term financial stability and value creation
Rationale: Healthcare financial management focuses on sustaining the
organization financially while ensuring quality patient care, not just profit
maximization.
, 2. Which of the following is considered a liquidity ratio?
A. Debt-to-equity ratio
B. Return on assets
C. Current ratio
D. Profit margin
Answer: Current ratio
Rationale: Liquidity ratios measure an organization’s ability to meet short-
term obligations. The current ratio (current assets ÷ current liabilities) is a
key liquidity metric.
3. Net present value (NPV) is used to:
A. Calculate accounting profit
B. Evaluate the profitability of an investment considering the time
value of money
C. Determine current assets
D. Measure liquidity
Answer: Evaluate the profitability of an investment considering the time
value of money
Rationale: NPV discounts future cash flows to present value to assess if an
investment will add value.
, 4. The break-even point represents:
A. The point of maximum profit
B. The level of sales at which total revenue equals total costs
C. The maximum capacity of the facility
D. The minimum operating cost
Answer: The level of sales at which total revenue equals total costs
Rationale: Break-even analysis helps managers determine the sales volume
needed to cover costs before generating profit.
5. Which financial statement shows the organization’s financial position
at a specific point in time?
A. Income statement
B. Statement of cash flows
C. Balance sheet
D. Budget report
Answer: Balance sheet
Rationale: The balance sheet reports assets, liabilities, and equity at a
particular date, reflecting the financial position.
6. The internal rate of return (IRR) is:
A. The discount rate that reduces NPV to zero
B. The discount rate at which an investment breaks even in NPV
, terms
C. The interest rate charged by banks
D. The rate of revenue growth
Answer: The discount rate at which an investment breaks even in NPV
terms
Rationale: IRR is the expected annualized rate of return that sets the present
value of cash inflows equal to cash outflows.
7. Which of the following is a capital budgeting method?
A. Liquidity ratio
B. Payback period
C. Debt ratio
D. Profit margin
Answer: Payback period
Rationale: Capital budgeting evaluates long-term investments; methods like
payback period and NPV help determine feasibility.
8. A healthcare organization’s long-term solvency is best assessed by:
A. Current ratio
B. Debt-to-equity ratio
C. Accounts receivable turnover
D. Gross margin
Exam Practice Questions And Correct
Answers (Verified Answers) Plus
Rationales 2026 Q&A | Instant
Download Pdf
1. The primary goal of financial management in healthcare organizations
is to:
A. Minimize expenses
B. Maximize profit
C. Ensure long-term financial stability and value creation
D. Reduce patient wait times
Answer: Ensure long-term financial stability and value creation
Rationale: Healthcare financial management focuses on sustaining the
organization financially while ensuring quality patient care, not just profit
maximization.
, 2. Which of the following is considered a liquidity ratio?
A. Debt-to-equity ratio
B. Return on assets
C. Current ratio
D. Profit margin
Answer: Current ratio
Rationale: Liquidity ratios measure an organization’s ability to meet short-
term obligations. The current ratio (current assets ÷ current liabilities) is a
key liquidity metric.
3. Net present value (NPV) is used to:
A. Calculate accounting profit
B. Evaluate the profitability of an investment considering the time
value of money
C. Determine current assets
D. Measure liquidity
Answer: Evaluate the profitability of an investment considering the time
value of money
Rationale: NPV discounts future cash flows to present value to assess if an
investment will add value.
, 4. The break-even point represents:
A. The point of maximum profit
B. The level of sales at which total revenue equals total costs
C. The maximum capacity of the facility
D. The minimum operating cost
Answer: The level of sales at which total revenue equals total costs
Rationale: Break-even analysis helps managers determine the sales volume
needed to cover costs before generating profit.
5. Which financial statement shows the organization’s financial position
at a specific point in time?
A. Income statement
B. Statement of cash flows
C. Balance sheet
D. Budget report
Answer: Balance sheet
Rationale: The balance sheet reports assets, liabilities, and equity at a
particular date, reflecting the financial position.
6. The internal rate of return (IRR) is:
A. The discount rate that reduces NPV to zero
B. The discount rate at which an investment breaks even in NPV
, terms
C. The interest rate charged by banks
D. The rate of revenue growth
Answer: The discount rate at which an investment breaks even in NPV
terms
Rationale: IRR is the expected annualized rate of return that sets the present
value of cash inflows equal to cash outflows.
7. Which of the following is a capital budgeting method?
A. Liquidity ratio
B. Payback period
C. Debt ratio
D. Profit margin
Answer: Payback period
Rationale: Capital budgeting evaluates long-term investments; methods like
payback period and NPV help determine feasibility.
8. A healthcare organization’s long-term solvency is best assessed by:
A. Current ratio
B. Debt-to-equity ratio
C. Accounts receivable turnover
D. Gross margin
