HPHM 4302 Healthcare Financial
Management
Midterm Exam Review
(Questions & Solutions)
2025
1
, 1. Multiple Choice
Question:
A hospital’s executive team is reviewing a proposed capital expenditure
for a new imaging facility. Which capital budgeting method is best suited
to determine whether the investment will generate a positive net
present value (NPV) given projected cash flows and a required rate of
return?
- A. Payback Period Analysis
- B. Net Present Value (NPV) Calculation
- C. Internal Rate of Return (IRR)
- D. Accounting Rate of Return (ARR)
Correct ANS:
B. Net Present Value (NPV) Calculation
Rationale:
NPV calculates the present value of all future cash flows—both inflows
and outflows—using a discount rate. A positive NPV indicates that the
investment is expected to generate value over the required rate of
return, making it the best approach for evaluating long-term capital
projects.
---
2. Fill-in-the-Blank
Question:
When evaluating long-term investments in healthcare, the __________
rate is used to discount future cash flows to their present value.
Correct ANS:
discount
2
, Rationale:
The discount rate reflects the time value of money and the risk
associated with future cash flows. In healthcare financial management,
selecting an appropriate discount rate is critical in capital budgeting
decisions.
---
3. True/False
Question:
True or False: Cost containment strategies in healthcare organizations
focus exclusively on reducing expenses, even if that compromises the
quality of patient care.
Correct ANS:
False
Rationale:
Effective cost containment in healthcare aims to optimize resource use
without sacrificing quality. Evidence-based cost management balances
efficiency with quality and patient outcomes.
---
4. Multiple Response
Question:
Which of the following are common performance indicators used in
healthcare financial management? (Select all that apply)
- A. Operating Margin
- B. Days Cash on Hand
- C. Staff Turnover Rates
- D. Return on Investment (ROI)
- E. Bed Occupancy Rate
3
Management
Midterm Exam Review
(Questions & Solutions)
2025
1
, 1. Multiple Choice
Question:
A hospital’s executive team is reviewing a proposed capital expenditure
for a new imaging facility. Which capital budgeting method is best suited
to determine whether the investment will generate a positive net
present value (NPV) given projected cash flows and a required rate of
return?
- A. Payback Period Analysis
- B. Net Present Value (NPV) Calculation
- C. Internal Rate of Return (IRR)
- D. Accounting Rate of Return (ARR)
Correct ANS:
B. Net Present Value (NPV) Calculation
Rationale:
NPV calculates the present value of all future cash flows—both inflows
and outflows—using a discount rate. A positive NPV indicates that the
investment is expected to generate value over the required rate of
return, making it the best approach for evaluating long-term capital
projects.
---
2. Fill-in-the-Blank
Question:
When evaluating long-term investments in healthcare, the __________
rate is used to discount future cash flows to their present value.
Correct ANS:
discount
2
, Rationale:
The discount rate reflects the time value of money and the risk
associated with future cash flows. In healthcare financial management,
selecting an appropriate discount rate is critical in capital budgeting
decisions.
---
3. True/False
Question:
True or False: Cost containment strategies in healthcare organizations
focus exclusively on reducing expenses, even if that compromises the
quality of patient care.
Correct ANS:
False
Rationale:
Effective cost containment in healthcare aims to optimize resource use
without sacrificing quality. Evidence-based cost management balances
efficiency with quality and patient outcomes.
---
4. Multiple Response
Question:
Which of the following are common performance indicators used in
healthcare financial management? (Select all that apply)
- A. Operating Margin
- B. Days Cash on Hand
- C. Staff Turnover Rates
- D. Return on Investment (ROI)
- E. Bed Occupancy Rate
3
