MHA 706 Module 1 Exam Questions and Complete Solutions Graded A+

Primary role of finance within any organization - Answer: Plan for, acquire, and utilize resources to maximize the efficiency (and hence value) of the enterprise Finance activities include - Answer: - Planning and budgeting - Financial reporting - Capital investment decisions - Financing decisions - Working capital management - Contract management - Financial risk management Finance activities can be summarized in four categories - Answer: - Cost minimization - Cash sufficiency - Capital access - Control of financial resources Comptroller - Answer: - Responsible for budgeting and reporting activities - Payables and receivables management Treasurer - Answer: - Acquisition and employment of capital - Debt management - Financial risk management 3 major categories of business organizations - Answer: - Proprietorship - Partnership - Corporation Advantages of proprietorships and partnerships - Answer: - Ease of formation - Subject to few regulations - No corporate income tax Disadvantages of proprietorships and partnerships - Answer: - Limited life - Difficult to transfer ownership - Unlimited liability - Difficult to raise capital Advantages of corporations - Answer: - Unlimited life - Easy transfer of ownership - Limited liability - Ease of raising capital Disadvantages of corporations - Answer: - Cost of formation and reporting - Double (or triple) taxation for investor-owned corporations Hybrid forms of organizations - Answer: - Limited liability partnerships - Limited liability company - Professional corporation or professional association Limited liability partnership (LLP) - Answer: - Partners shared general business liability - Partners are only liable for their own malpractice actions Limited liability company (LLC) - Answer: - Members are taxed like partners - Liability like stockholders Professional corporation (PC) or professional association (PA) - Answer: - Owners have benefits of incorporation - However, still liable for malpractice - Often used by individual clinicians Stockholders have: - Answer: - Right of control - Claim on residual earnings and residual liquidation proceeds - Typically expect a return on their investment in the form of dividends and/or capital gains