HMGT 3311 FINAL EXAM 2025 UPDATE|COMPREHENSIVE QUESTIONS AND
VERIFIED ANSWERS (COMPLETE SOLUTIONS) EXAM|GRADE A+!!
Question 1
What type of financial statement analysis is used to compare changes in a given line item, such
as Cash, between two consecutive fiscal periods (i.e., Cash in 20X0 versus 20X1)?
A) Vertical Analysis
B) Trend Analysis
C) Ratio Analysis
D) Comparative Ratio Analysis
E) Horizontal Analysis
Correct Answer: E) Horizontal Analysis
Rationale: Horizontal Analysis (or comparative analysis) specifically compares the change
in a single line item over two consecutive periods, expressed as an absolute dollar change
and a percentage change. The formula used is (Current Year - Previous Year) / Previous
Year.
Question 2
What type of financial statement analysis measures the relative weight of various line items by
expressing them as a percentage of a base amount (e.g., current assets as a percent of total
assets)?
A) Liquidity Analysis
B) Trend Analysis
C) Vertical Analysis
D) Horizontal Analysis
E) Activity Analysis
Correct Answer: C) Vertical Analysis
Rationale: Vertical Analysis, also known as common-size analysis, expresses each line item
on a financial statement as a percentage of a base figure (e.g., Total Assets on the Balance
Sheet or Total Revenue on the Income Statement). This allows for easy comparison of the
composition of financial statements over time or between different organizations.
Question 3
Which financial analysis technique extends the concept of horizontal analysis over multiple time
periods, typically using the first year as the base year for comparison?
A) Working Capital Analysis
B) Trend Analysis
C) Vertical Analysis
D) Cross-Sectional Analysis
E) Break-Even Analysis
Correct Answer: B) Trend Analysis
Rationale: Trend Analysis extends the comparison from two periods (Horizontal Analysis)
, 2
to three or more consecutive periods. It selects a base year, assigns it a value of 100%, and
then expresses all subsequent years as a percentage of that base year, allowing for the long-
term trend of a financial item to be observed.
Question 4
The primary purpose of Ratio Analysis in healthcare financial management is to:
A) Forecast the organization's total annual budget.
B) Provide information about the financial performance of an organization that goes beyond
analyzing only one line item at a time.
C) Determine the ethical compliance of the organization's transactions.
D) Calculate the exact value of the organization’s non-current assets.
E) Serve as the sole basis for the external audit opinion.
Correct Answer: B) Provide information about the financial performance of an organization
which goes beyond that which is available from analyzing only one line item at a time.
Rationale: Ratio Analysis takes two or more line items from the financial statements and
creates a relationship that provides insight into a specific area of performance (e.g.,
liquidity, profitability, or efficiency) that cannot be gained from simply looking at the raw
numbers in isolation.
Question 5
Which of the following is NOT one of the four main categories used to classify financial ratios?
A) Liquidity
B) Revenue, Expense, and Profitability
C) Activity
D) Efficiency
E) Capital Structure
Correct Answer: D) Efficiency
Rationale: The four main categories of financial ratios are: 1) Liquidity, 2) Revenue,
Expense, and Profitability, 3) Activity, and 4) Capital Structure. While 'Activity' ratios
measure efficiency, 'Efficiency' itself is not typically listed as a separate, distinct category in
this classification system.
Question 6
Which category of financial ratios attempts to answer the question, "How well is the organization
positioned to meet its short-term obligations?"
A) Activity Ratios
B) Capital Structure Ratios
C) Liquidity Ratios
D) Profitability Ratios
E) Operating Ratios
, 3
Correct Answer: C) Liquidity Ratios
Rationale: Liquidity ratios, such as the Current Ratio and Quick Ratio, focus on the
relationship between current assets and current liabilities to determine the organization's
ability to cover its short-term debt obligations using its most liquid resources.
Question 7
The category of ratios that answers the questions, "How profitable is an organization?" and
"How effective is it in controlling its operating costs and increasing its operating revenues?" is:
A) Liquidity Ratios
B) Capital Structure Ratios
C) Activity Ratios
D) Revenue, Expense, and Profitability Ratios
E) Solvency Ratios
Correct Answer: D) Revenue, Expense, and Profitability Ratios
Rationale: This category directly measures how well the organization generates revenue,
manages expenses, and ultimately achieves a surplus (profit). Key examples include the
Operating Margin and Total Margin.
Question 8
Activity Ratios primarily help a financial manager answer which key question about the
organization?
A) How well is the organization positioned to meet its short-term obligations?
B) How efficiently is the organization using its assets to produce revenues?
C) How are the organization's assets financed?
D) How able is the organization to take on new debt?
E) What is the average age of the organization's fixed assets?
Correct Answer: B) How efficiently is the organization using its assets to produce revenues?
Rationale: Activity ratios, such as Days in Accounts Receivable and Total Asset Turnover,
assess the effectiveness and efficiency with which an organization utilizes its assets (current
and non-current) to generate patient revenues.
Question 9
Capital Structure Ratios help answer which two critical questions for a healthcare organization?
A) 1) How quickly are accounts receivable collected? and 2) How much cash is on hand?
B) 1) What is the operating margin? and 2) What is the total margin?
C) 1) How profitable is the organization? and 2) How effective is cost control?
D) 1) How are the organization's assets financed? and 2) How able is the organization to take on
new debt?
E) 1) How much working capital is available? and 2) What is the current ratio?
, 4
Correct Answer: D) 1) How are the organization's assets financed? and 2) How able is the
organization to take on new debt?
Rationale: Capital Structure ratios focus on long-term financial stability by examining the
mix of debt (liabilities) and equity (net assets) used to finance assets. This analysis
determines the organization's long-term risk and capacity for future borrowing (leverage).
Question 10
The primary way Capital Structure Ratios assist in financial analysis is by enabling the
organization to:
A) Forecast future patient volume.
B) Analyze the organization's ability to pay off its long-term debts.
C) Determine the discount rate for capital investments.
D) Calculate the cost of inventory turnover.
E) Measure the efficiency of billing and collections.
Correct Answer: B) Analyze the organization's ability to pay off its long-term debts.
Rationale: Capital structure ratios, particularly the Debt-to-Equity Ratio, examine the
organization's level of financial leverage (reliance on debt) and its long-term solvency—the
ability to meet its obligations over a period greater than one year.
Question 11
What financial metric is defined by the following equation: (Current Year - Previous Year) /
Previous Year
×
100?
A) Vertical Analysis Percentage
B) Current Ratio
C) Quick Ratio
D) Horizontal Analysis Percentage
E) Acid Test Ratio
Correct Answer: D) Horizontal Analysis Percentage
Rationale: This formula calculates the percentage change between two consecutive periods
for a specific line item, which is the definition of the Horizontal Analysis Percentage. This
allows financial managers to quickly assess which items are driving significant year-over-
year changes.
Question 12
The Current Ratio is calculated as Current Assets
÷
VERIFIED ANSWERS (COMPLETE SOLUTIONS) EXAM|GRADE A+!!
Question 1
What type of financial statement analysis is used to compare changes in a given line item, such
as Cash, between two consecutive fiscal periods (i.e., Cash in 20X0 versus 20X1)?
A) Vertical Analysis
B) Trend Analysis
C) Ratio Analysis
D) Comparative Ratio Analysis
E) Horizontal Analysis
Correct Answer: E) Horizontal Analysis
Rationale: Horizontal Analysis (or comparative analysis) specifically compares the change
in a single line item over two consecutive periods, expressed as an absolute dollar change
and a percentage change. The formula used is (Current Year - Previous Year) / Previous
Year.
Question 2
What type of financial statement analysis measures the relative weight of various line items by
expressing them as a percentage of a base amount (e.g., current assets as a percent of total
assets)?
A) Liquidity Analysis
B) Trend Analysis
C) Vertical Analysis
D) Horizontal Analysis
E) Activity Analysis
Correct Answer: C) Vertical Analysis
Rationale: Vertical Analysis, also known as common-size analysis, expresses each line item
on a financial statement as a percentage of a base figure (e.g., Total Assets on the Balance
Sheet or Total Revenue on the Income Statement). This allows for easy comparison of the
composition of financial statements over time or between different organizations.
Question 3
Which financial analysis technique extends the concept of horizontal analysis over multiple time
periods, typically using the first year as the base year for comparison?
A) Working Capital Analysis
B) Trend Analysis
C) Vertical Analysis
D) Cross-Sectional Analysis
E) Break-Even Analysis
Correct Answer: B) Trend Analysis
Rationale: Trend Analysis extends the comparison from two periods (Horizontal Analysis)
, 2
to three or more consecutive periods. It selects a base year, assigns it a value of 100%, and
then expresses all subsequent years as a percentage of that base year, allowing for the long-
term trend of a financial item to be observed.
Question 4
The primary purpose of Ratio Analysis in healthcare financial management is to:
A) Forecast the organization's total annual budget.
B) Provide information about the financial performance of an organization that goes beyond
analyzing only one line item at a time.
C) Determine the ethical compliance of the organization's transactions.
D) Calculate the exact value of the organization’s non-current assets.
E) Serve as the sole basis for the external audit opinion.
Correct Answer: B) Provide information about the financial performance of an organization
which goes beyond that which is available from analyzing only one line item at a time.
Rationale: Ratio Analysis takes two or more line items from the financial statements and
creates a relationship that provides insight into a specific area of performance (e.g.,
liquidity, profitability, or efficiency) that cannot be gained from simply looking at the raw
numbers in isolation.
Question 5
Which of the following is NOT one of the four main categories used to classify financial ratios?
A) Liquidity
B) Revenue, Expense, and Profitability
C) Activity
D) Efficiency
E) Capital Structure
Correct Answer: D) Efficiency
Rationale: The four main categories of financial ratios are: 1) Liquidity, 2) Revenue,
Expense, and Profitability, 3) Activity, and 4) Capital Structure. While 'Activity' ratios
measure efficiency, 'Efficiency' itself is not typically listed as a separate, distinct category in
this classification system.
Question 6
Which category of financial ratios attempts to answer the question, "How well is the organization
positioned to meet its short-term obligations?"
A) Activity Ratios
B) Capital Structure Ratios
C) Liquidity Ratios
D) Profitability Ratios
E) Operating Ratios
, 3
Correct Answer: C) Liquidity Ratios
Rationale: Liquidity ratios, such as the Current Ratio and Quick Ratio, focus on the
relationship between current assets and current liabilities to determine the organization's
ability to cover its short-term debt obligations using its most liquid resources.
Question 7
The category of ratios that answers the questions, "How profitable is an organization?" and
"How effective is it in controlling its operating costs and increasing its operating revenues?" is:
A) Liquidity Ratios
B) Capital Structure Ratios
C) Activity Ratios
D) Revenue, Expense, and Profitability Ratios
E) Solvency Ratios
Correct Answer: D) Revenue, Expense, and Profitability Ratios
Rationale: This category directly measures how well the organization generates revenue,
manages expenses, and ultimately achieves a surplus (profit). Key examples include the
Operating Margin and Total Margin.
Question 8
Activity Ratios primarily help a financial manager answer which key question about the
organization?
A) How well is the organization positioned to meet its short-term obligations?
B) How efficiently is the organization using its assets to produce revenues?
C) How are the organization's assets financed?
D) How able is the organization to take on new debt?
E) What is the average age of the organization's fixed assets?
Correct Answer: B) How efficiently is the organization using its assets to produce revenues?
Rationale: Activity ratios, such as Days in Accounts Receivable and Total Asset Turnover,
assess the effectiveness and efficiency with which an organization utilizes its assets (current
and non-current) to generate patient revenues.
Question 9
Capital Structure Ratios help answer which two critical questions for a healthcare organization?
A) 1) How quickly are accounts receivable collected? and 2) How much cash is on hand?
B) 1) What is the operating margin? and 2) What is the total margin?
C) 1) How profitable is the organization? and 2) How effective is cost control?
D) 1) How are the organization's assets financed? and 2) How able is the organization to take on
new debt?
E) 1) How much working capital is available? and 2) What is the current ratio?
, 4
Correct Answer: D) 1) How are the organization's assets financed? and 2) How able is the
organization to take on new debt?
Rationale: Capital Structure ratios focus on long-term financial stability by examining the
mix of debt (liabilities) and equity (net assets) used to finance assets. This analysis
determines the organization's long-term risk and capacity for future borrowing (leverage).
Question 10
The primary way Capital Structure Ratios assist in financial analysis is by enabling the
organization to:
A) Forecast future patient volume.
B) Analyze the organization's ability to pay off its long-term debts.
C) Determine the discount rate for capital investments.
D) Calculate the cost of inventory turnover.
E) Measure the efficiency of billing and collections.
Correct Answer: B) Analyze the organization's ability to pay off its long-term debts.
Rationale: Capital structure ratios, particularly the Debt-to-Equity Ratio, examine the
organization's level of financial leverage (reliance on debt) and its long-term solvency—the
ability to meet its obligations over a period greater than one year.
Question 11
What financial metric is defined by the following equation: (Current Year - Previous Year) /
Previous Year
×
100?
A) Vertical Analysis Percentage
B) Current Ratio
C) Quick Ratio
D) Horizontal Analysis Percentage
E) Acid Test Ratio
Correct Answer: D) Horizontal Analysis Percentage
Rationale: This formula calculates the percentage change between two consecutive periods
for a specific line item, which is the definition of the Horizontal Analysis Percentage. This
allows financial managers to quickly assess which items are driving significant year-over-
year changes.
Question 12
The Current Ratio is calculated as Current Assets
÷
