BUSI 323 Financial Analysis & Management
Final Exam Review (Qns & Ans)
2025
1. Which financial metric measures a healthcare organization’s
ability to generate profit relative to its revenue?
A. Gross margin
B. Return on investment (ROI)
C. Operating margin
D. Net present value (NPV)
ANS: C. Operating margin
Rationale: Operating margin evaluates profitability from core
operations, excluding non-operational income.
©2025
,2. What does the abbreviation DRG stand for in healthcare
finance?
A. Diagnostic Revenue Generator
B. Disease Resource Guidelines
C. Diagnostic Related Group
D. Direct Report Group
ANS: C. Diagnostic Related Group
Rationale: DRGs classify hospital cases to standardize
payments based on diagnoses and treatments.
3. Which type of budgeting is most commonly used in healthcare
to allocate resources for a single fiscal year?
A. Zero-based budgeting
B. Incremental budgeting
C. Flexible budgeting
D. Performance-based budgeting
ANS: B. Incremental budgeting
Rationale: Incremental budgeting adjusts prior budgets to
account for expected changes in resource needs.
4. What is the purpose of cost accounting in healthcare
organizations?
©2025
, A. Managing patient records
B. Identifying costs associated with providing services
C. Calculating employee salaries
D. Estimating market growth
ANS: B. Identifying costs associated with providing services
Rationale: Cost accounting tracks expenses incurred to
deliver healthcare services, enabling resource optimization.
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True/False Questions
5. The cash flow statement provides information about the
profitability of a healthcare organization.
ANS: False
Rationale: The cash flow statement evaluates cash inflows
and outflows, not profitability, which is assessed by the income
statement.
6. Capital budgeting is used to evaluate potential long-term
investment projects in healthcare organizations.
ANS: True
©2025
, Rationale: Capital budgeting assesses investment returns to
guide decisions on projects like facility expansions or equipment
purchases.
7. Financial ratios, such as current ratio and debt-to-equity ratio,
are used to evaluate the financial health of healthcare
organizations.
ANS: True
Rationale: Financial ratios help assess liquidity, profitability,
and stability.
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Fill-in-the-Blank Questions
8. The process of assigning costs to specific healthcare services is
known as ________.
ANS: Cost allocation
Rationale: Cost allocation assigns indirect and direct costs to
services, ensuring accurate financial tracking.
9. The ________ ratio measures a healthcare organization's ability
to meet short-term financial obligations using current assets.
ANS: Current ratio
©2025
Final Exam Review (Qns & Ans)
2025
1. Which financial metric measures a healthcare organization’s
ability to generate profit relative to its revenue?
A. Gross margin
B. Return on investment (ROI)
C. Operating margin
D. Net present value (NPV)
ANS: C. Operating margin
Rationale: Operating margin evaluates profitability from core
operations, excluding non-operational income.
©2025
,2. What does the abbreviation DRG stand for in healthcare
finance?
A. Diagnostic Revenue Generator
B. Disease Resource Guidelines
C. Diagnostic Related Group
D. Direct Report Group
ANS: C. Diagnostic Related Group
Rationale: DRGs classify hospital cases to standardize
payments based on diagnoses and treatments.
3. Which type of budgeting is most commonly used in healthcare
to allocate resources for a single fiscal year?
A. Zero-based budgeting
B. Incremental budgeting
C. Flexible budgeting
D. Performance-based budgeting
ANS: B. Incremental budgeting
Rationale: Incremental budgeting adjusts prior budgets to
account for expected changes in resource needs.
4. What is the purpose of cost accounting in healthcare
organizations?
©2025
, A. Managing patient records
B. Identifying costs associated with providing services
C. Calculating employee salaries
D. Estimating market growth
ANS: B. Identifying costs associated with providing services
Rationale: Cost accounting tracks expenses incurred to
deliver healthcare services, enabling resource optimization.
---
True/False Questions
5. The cash flow statement provides information about the
profitability of a healthcare organization.
ANS: False
Rationale: The cash flow statement evaluates cash inflows
and outflows, not profitability, which is assessed by the income
statement.
6. Capital budgeting is used to evaluate potential long-term
investment projects in healthcare organizations.
ANS: True
©2025
, Rationale: Capital budgeting assesses investment returns to
guide decisions on projects like facility expansions or equipment
purchases.
7. Financial ratios, such as current ratio and debt-to-equity ratio,
are used to evaluate the financial health of healthcare
organizations.
ANS: True
Rationale: Financial ratios help assess liquidity, profitability,
and stability.
---
Fill-in-the-Blank Questions
8. The process of assigning costs to specific healthcare services is
known as ________.
ANS: Cost allocation
Rationale: Cost allocation assigns indirect and direct costs to
services, ensuring accurate financial tracking.
9. The ________ ratio measures a healthcare organization's ability
to meet short-term financial obligations using current assets.
ANS: Current ratio
©2025
