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ACCA Financial Management

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  • Answer 50 questions in 15 minutes.
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  • Match each statement with the correct term.
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This is a study tool. The 3 wrong answers for each question are randomly chosen from answers to other questions. So, you might find at times the answers obvious, but you will see it re-enforces your understanding as you take the test each time.
1. [(excess of revenues over expenses + interest expense + depreciation expense)/(interest expense + principal payments))- A ratio that measures an organization's ability to pay back a loan. In for-profit organizations - it is calculated as: (net income






2. A security interest in one or more assets granted to lenders in a secured loan.






3. [(cash + marketable securities)/current liabilities). A liquidity ratio that measures how much cash and marketable securities are available to payoff all current liabilities.






4. Cash flows that occur solely as a result of undertaking a project. Basically the marginal difference between alternatives.






5. I) Calculating interest using the compound interest method. 2) Adjusting for the time value of money forward in time to a future value. See also Compound interest method and Discounting.






6. The ease and speed with which an asset can be turned into cash.






7. Portion of profit an organization distributes to investors. By law - only investor-owned health care organizations can distribute dividends outside the organization.






8. Cash inflows and outflows resulting from financing activities - such as obtaining grants or endowments - or from borrowing or paying back long-term debt.






9. An investment that generates an annuity for an indefinite period of time - basically forever.






10. A method to evaluate the feasibility of an investment by determining how long it would take until the initial investment is recovered. This method does not account for the time value of money.






11. Assets minus Liabilities. One of the three major categories on the balance sheet. Traditionally known as stockholders' equity in investor-owned organizations and fund balance in not-for-profit organizations. In not-for-profit health care organization






12. Amounts given to the organization for operating purposes - such as governmental appropriations and unrestricted donations.






13. Future value. What an amount invested today (or a series of payments made over time) will be worth at a given time in the future using the compound interest method. This accounts for the time value of money. See also Present value.






14. Opposite of the authoritarian approach. The roles and responsibilities of the budgeting process are diffused throughout the organization. Often called the participatory approach.






15. That process of budgeting where the environmental assessment and planning of future activities are largely decided upon by a few individuals - and the budget is essentially dictated to the rest of the organization. Often called authoritarian approach






16. Cash inflows and outflows for the organization resulting from investing activities such as purchasing and selling investments or investing in itself by purchasing or selling non-current assets. It also includes transfers to and from the parent corpor






17. If a project is undertaken - these cash flows are the indirect increases or decreases in cash flows that will occur elsewhere in the organization.






18. Ratios designed to answer the question: How profitable is the organization?






19. The resources owned by the organization. It is one of the three major categories on the balance sheet.






20. [(excess of revenues over expenses + interest expense)/interest expense].- This ratio enables creditors and lenders to evaluate an organization's ability to generate earnings necessary to meet interest expense requirements. In for-profit organization






21. A donation that has conditions which must be satisfied. See also Temporarily restricted net assets.






22. Revenues generated from an organization's operating activities.






23. The budget format that lists revenues and expenses by category - such as labor - travel - and supplies. Categories are sometimes broken down into sub-categories. See also Performance budget and Program budget.






24. The degree of dispersion of responsibility within an organization. See also Centralization.






25. [total revenues/total assets].- This ratio measures the overall efficiency of the organization's assets to produce revenue. It answers the question: For every dollar in assets - how many dollars of revenue are being generated?






26. Assets that have a useful life greater than one year - such as plant - property - and equipment. Plant and equipment are depreciated over time; land (property) is not.






27. Operating income plus other income. This is analogous to net income before taxes in for-profit entities.






28. (non-operating revenues/total operating revenues)- A ratio that reflects how dependent the organization is on non-patient care related net income.






29. The balance sheet category that includes actual money on hand as well as money equivalents - such as savings and checking accounts. It excludes cash restricted as to its use for something other than current operations.






30. The bottom area of the financial statements that contains key information not available in the body of the statements - such as how charity is determined - the composition of investments - which assets are restricted - and the depreciation method.






31. Operating income not reported elsewhere under revenues - gains - and other support.






32. A measure of the income earned from operating activities. It is calculated as: unrestricted revenues - gains - and other support -expenses and losses.






33. Tools used to increase the amount of cash available to the organization. The objective of billing - credit - and collection policies is to accelerate cash receipts; the objective of cash disbursement policies is to slow down cash outflows.






34. The purchase of assets with contributed and internally generated funds. See also Debt financing.






35. {current liabilities/[(total expenses






36. The delay between providing the service and getting the bill to the patient or third party. There are two aspects of billing float: assembling the bill and delivering the bill to the patient or third-party payor.






37. Internal rate of return. The percentage return on an investment. It is the rate of return at which the net present value equals zero. Often used as a comparison to cost of capital.






38. (excess of revenues over expenses/net assets)- In not-for-profit health care organizations - it measures the rate of return for each dollar in net assets. In for-profit organizations - it measures the rate of return for each dollar in owners' equity;






39. Capital investment decisions designed to increase the operational capability of a health care organization.






40. Bonds that have received a rating ranging from AM to BBB (at S&P) - or Aaa to Bbb (Moody's) - of which the highest are called quality ratings.






41. Requiring the patient to pay part of his/her health care bill. These payments are used to prevent over-utilization of services.






42. A method by which the organization develops its strategies and budgets to meet future financial targets.






43. Funds provided by a private entity or individual without the requirement of repayment. Donations can either be restricted or unrestricted.






44. The central document of the planning/control cycle. It identifies revenues and resources that will be needed by an organization to achieve its goals and objectives.






45. The process of distributing service center costs to mission centers - to determine the full cost of each mission center






46. The amount the holder of the coupon receives periodically - usually semiannually. Over the year - it equals the coupon rate times the face value of the bond.






47. The amount of inventory on hand at the end of an accounting period. See also Beginning inventory.






48. The organization's legal obligations to pay its creditors. Liabilities are classified as current and non-current. Liabilities are one of the three major categories on the balance sheet and are part of the fundamental accounting equation.






49. The method by which to distribute service center costs to mission centers; in general the one that most accurately measures use by the cost centers that receives its services (food service - # of meals - hospital laundry - # of pounds processed)






50. Organizational units responsible for providing health care related services to clients - patients - or enrollees - and the related costs thereof.






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