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Q:
on the present value table in this textbook, the interest rate is found on the horizontal columns and the number of years in the period is found on the vertical columns.
Q:
the major purpose of present value analysis (computing the time value of money) is to evaluate alternatives regarding the use of money.
Q:
the internal rate of return (irr) uses a discounted cash flow technique.
Q:
internal rate of return (irr) represents the rate of interest that discounts present net inflows from a proposed investment down to the amount invested.
Q:
unadjusted rate of return is sometimes called the accountant's method because information required is all obtained from the financial statements.
Q:
john, the controller at one of the metropolis health system hospitals, has used the unadjusted rate of return method when preparing a report submitted to the executive committee. the committee chairman, who has a reputation as a know-it-all, questions the use of the unadjusted rate of return method. at this point the vice president of finance jumps in and says he approves of using this method: first because the information necessary for the computation is obtained from existing financial statements, second because it is one of the recognized methods of evaluating the use of the hospitals money, and third because it is easy to understand. is the vice president correct in all three points? a. yes b. no c. dont know
Q:
if james, an assistant to the cfo, has to create a multiple-page worksheet in order to set up the assumptions for evaluating the purchase of a modestly priced piece of equipment, then the cfos chosen evaluation method is: a. probably too complex b. just right c. neither of the above
Q:
when evaluating the use of resources, it is important to choose a method that: a. can be readily calculated b. is understood by the managers who will be using it c. is not too cumbersome d. all of the above
Q:
the evaluation process can be more manageable if one chosen method is uniformly used to evaluate: a. the return on investment b. the payback period c. both of the above d. neither of the above
Q:
when evaluating the use of resources in healthcare organizations, it is important to use: a. an objective process b. a subjective process c. either of the above d. not applicable
Q:
if you are typically making at least one best case and one worst case computation, then we can generally assume that you are using the: a. unadjusted rate of return method b. payback period method c. either of the above d. neither of the above
Q:
under the payback period concept, it is often prudent to: a. run more than one payback period computation b. base multiple runs on sets of different circumstances c. change only the interest rate on different runs d. a & b e. a & c f. b & c g. none of the above
Q:
when using the look-up table as described in the text, read down the appropriate column and read across the appropriate line. the point where these meet on the table contains the present value factor to be used in your calculations. a. correct b. not correct c. not applicable
Q:
when preparing to use a look-up table as described in the text: a. find the line for the proper interest b. find the column for the proper number of years c. both of the above d. neither of the above
Q:
when calculating the payback period method for the acquisition of equipment, the most critical assumption is: a. useful life b. volume of usage c. interest rate d. all of the above e. none of the above
Q:
assumptions are critically important to computations in the payback period theory. a. correct b. not correct c. not applicable
Q:
what method answers the following question: if we invested $1,000 under a particular set of assumptions, how long would it take to get our $1,000 back?: a. the internal rate of return method b. the payback period method c. either of the above d. neither of the above
Q:
what method provides a result that can be thought of as a kind of break-even point for investment purposes? a. the payback period method b. the unadjusted rate of return method c. the internal rate of return method d. none of the above
Q:
what method relies on an average investment calculation? a. the present-value analysis method b. the internal rate of return method c. the unadjusted rate of return method d. a & b e. a & c f. all of the above g. neither of the above
Q:
what method calculates from period to period? a. the present-value analysis method b. the internal rate of return method c. the unadjusted rate of return method d. all of the above e. neither of the above
Q:
the unadjusted rate of return computation described in the text uses a look-up table. a. correct b. not correct c. not applicable
Q:
when computing the rate of return, what method takes the rate of return obtained and restates it? a. the internal rate of return method b. the unadjusted rate of return method c. either of the above d. neither of the above
Q:
in one particular method of computing the rate of return, the result represents the maximum rate of interest that can be paid for capital over the entire span of the investment without incurring a loss. this method is known as: a. the internal rate of return method b. the unadjusted rate of return method c. the payback period method
Q:
the factor that is found in the present value table can also be obtained through the use of: a. a computer spreadsheet b. a business analyst calculator c. either of the above d. neither of the above
Q:
the factor from the present value table for ten years at ten percent is 0.3855. if you want to find the present value of $8,000 under these assumptions (10 years and 10%), then you must do the following: a. multiply $8,000 times 0.3855 b. divide $8,000 times 0.3855 c. find a different factor d. none of the above
Q:
the figures on the present value table represent: a. the value of $100.00 b. the value of $10.00 c. the value of $1.00
Q:
present value tables are also called look-up tables because one can look-up the answer. a. correct b. not correct c. not applicable
Q:
the method described in the preceding two questions has the advantage of accommodating the organizations choice of: a. inventory method b. depreciation method c. neither of the above
Q:
the average investment amount is arrived at by taking (1) the total unrecovered asset cost at the beginning of estimated useful life plus (2) the unrecovered asset cost at the end of estimated useful life and: a. dividing by two b. multiplying by two c. neither of the above
Q:
average annual net income divided by the average investment amount is another method of computing: a. present value b. unadjusted rate of return c. budget variance
Q:
the concept of present-value analysis is based on the fact that: a. the value of a dollar in the future is worth more than the value of a dollar today b. the value of a dollar today is more than the value of a dollar in the future c. neither of the above
Q:
the payback period concept is used extensively in evaluating whether to invest in: a. certificates of deposit b. additional inventory c. plant and/or equipment d. all of the above e. none of the above
Q:
a payback period is the length of time required for the cash coming in from an investment to equal the: a. "best case" assumed income b. amount of cash spent over the entire payback period c. amount of cash originally spent when the investment was acquired
Q:
average annual net income divided by original investment amount equals: a. present value b. rate of return c. budget variance
Q:
evaluating the use of money is possible through computation of: a. internal rate of return b. present value analysis c. unadjusted rate of return d. payback period e. all of the above f. none of the above
Q:
profitability ratios reflect the ability of the organization to operate with an __________ of operating revenue over operating expense.
Q:
liquidity ratios reflect the ability of the organization to meet its' __________ obligations. ans: current (optional
Q:
ratio analysis should be conducted as a __________ analysis.
Q:
the standard by which the quick ratio is measured is generally two to one.
Q:
the debt service coverage ratio (dscr) is computed as total liabilities divided by unrestricted net assets.
Q:
to calculate a ratio, divide the bottom number (denominator) into the top number (numerator).
Q:
days receivables and days cash on hand (dcoh) are both solvency types of ratios.
Q:
while the current ratio is a measure of short-term debt-paying ability, the quick ratio is an even more severe test of such ability.
Q:
to calculate a quick ratio, the denominator consists of current liabilities. the numerator is a combination of the following: a. cash and cash equivalents b. gross receivables c. net receivables d. a & b e. a & c f. none of the above
Q:
do solvency and profitability ratios actually measure the same things, but in different ways? a. always b. sometimes c. never d. dont know
Q:
if current assets amount to $120,000, total assets are $600,000, current liabilities are $60,000, long term debt is $340,000 and total liabilities are $400,000, what is the current ratio? a. 1.5 to 1 b. 1.76 to 1 c. 2 to 1 d. none of the above
Q:
if assets are $1,000,000, liabilities are $600,000 and net worth is $400,000, what is the liabilities to fund balance/net worth ratio? a. 0.667 b. 1.4 c. 1.5 d. 1.6 e. none of the above
Q:
an important part of the finance world is the use of proper terms. in that context, when debt (loans, mortgages, etc.) is involved, what is the proper spelling of the following term, or word? a. principal b. principle c. neither of the above
Q:
sample hospitals benchmark data report also includes the days receivable ratio (listed on the report as net days in patient ar). the days receivable for year 1 amounted to 50.73 days, while the days receivable for the first quarter of year 2 amounted to 49.0 days. is the result for the first quarter of year 2 better or worse than the result reported for year 1? a. better b. worse c. the same (neutral) d. dont know
Q:
sample hospitals benchmark data report appears in the metropolis health systems appendix whose title begins comparative analysis using financial ratios and benchmarking. the benchmark data report contains various ratios, one of which is the return on total assets. accordingly, sample hospitals return on total assets for year 1 amounted to minus 2.37%, while the first quarter of its year 2 amounted to minus 3.58%. is the result for the first quarter of year 2 better or worse than the result reported for year 1? a. better b. worse c. the same (neutral) d. dont know
Q:
the current ratio is typically measured against a standard of: a. 1 to 1 b. 2 to 1 c. 1 to 2 d. none of the above
Q:
the days receivable computation: a. represents the number of days in receivables b. is a common measure of billing performance c. is a common measure of collection performance d. is a measure of worth as well as performance e. all of the above f. none of the above
Q:
the days cash on hand ratio indicates cash on hand in relation to the amount of: a. daily operating expense b. monthly operating expense c. yearly operating expense d. none of the above
Q:
ratio analysis should: a. be interpreted within the context of the operation b. have the differences between periods considered c. typically be conducted as a comparative analysis d. rarely be conducted as a comparative analysis e. a & b f. a, b & c g. a, b & d h. none of the above
Q:
the liabilities to fund balance computation is typically presented as a: a. percentage b. ratio c. either of the above d. neither of the above
Q:
the liabilities to fund balance computation may be represented as: a. total debt divided by tangible net worth b. total liabilities divided by unrestricted net assets c. either of the above d. neither of the above
Q:
lending agreements often have a provision that requires the debt service coverage ratio (dscr) to be maintained: a. at or above a certain figure b. below a certain figure c. either of the above d. neither of the above
Q:
in regard to the dscr formula, change in unrestricted net assets is also typically known as: a. net debt service b. total income c. net assets d. none of the above
Q:
the formula for a debt service coverage ratio (dscr) is represented as change in unrestricted net assets plus interest, depreciation and amortization divided by: a. maximum total debt service b. maximum annual debt service c. total long-term liabilities d. none of the above
Q:
an alternative computation for return on total assets is: a. net income divided by total assets b. net income divided by total net worth c. either of the above d. neither of the above
Q:
the acronym ebit a. is a broad measure in common use b. is widely used in by credit analysts c. is computed as earnings after interest and taxes (ebit) divided by total assets d. a & b e. b & c f. all of the above
Q:
if total operating revenues are $20,000 and the operating margin is 10%, what is the amount of operating income? a. $200 b. $1,000 c. $2,000 d. none of the above
Q:
the operating margin: a. sometimes enters into credit analysis b. is a multipurpose measure c. is used for a number of managerial purposes d. all of the above e. none of the above
Q:
if operating income is $500,000 and total operating revenues are $10,000,000, the correct operating margin is: a. 5% b. 20% c. 2% d. 50%
Q:
the operating margin is computed as follows: a. total operating revenues divided by operating income (or loss) b. operating income (or loss) divided by total operating revenues c. either of the above d. neither of the above
Q:
the indicator that is more severe than the liabilities to fund balance ratio is described as: a. total assets to fund balance b. net worth (fund balance) to long-term debt c. long-term debt to net worth (fund balance) d. none of the above
Q:
solvency ratios reflect the ability of the organization to pay its annual debt obligations, including: a. annual interest and principal obligations on its long-term debt b. annual interest and principal obligations on both its long-term and short-term debt c. annual principal obligations only on its long-term debt d. none of the above
Q:
liquidity ratios measure: a. long-term sufficiency b. short-term sufficiency c. both of the above d. neither of the above
Q:
the ratios adopted in healthcare financial management are typically: a. uniform measures b. convenient measures c. both of the above d. neither of the above
Q:
solvency ratios: a. reflect the ability of the organization to pay annual obligations on its long term debt b. measure the organization's ability to have sufficient resources to meet its long term obligations c. both a and b d. neither a nor b
Q:
the liabilities to fund balance ratio is: a. a quick indicator of debt load b. also known as the debt to net worth ratio c. both a and b d. neither a nor b
Q:
return on total assets may be computed as: a. earnings before interest and taxes (ebit) divided by total assets b. earnings after interest and taxes (ebit) divided by total assets c. earnings before interest and taxes (ebit) divided by total net worth
Q:
profitability ratios include: a. operating margin b. return on total assets c. both a and b d. neither a nor b
Q:
subsidiary reports are __________ to the four major reports.
Q:
the statement of cash flows typically takes the __________ basis statements and converts them to a cash flow for the period through a series of reconciling adjustments that account for the noncash amounts.
Q:
the excess of revenue over expenses flows back into equity or fund balance through the statement of fund balance/net worth.
Q:
the basic formula for a statement of revenue and expense is as follows: operating revenue minus operating expense equals operating income.
Q:
the statement of revenue is stated at a particular point in time.
Q:
the balancing of the elements in the balance sheet represents: "beginning balance plus operating income equals ending balance".
Q:
in cash basis accounting, revenue is recorded when it is earned and expenses are recorded when they are incurred.