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ACCA Financial Management

  • 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. A contract between a lender and a potential borrower preauthorizing the potential borrower's right to borrow up to a specific amount on request as long as they fulfill the terms and conditions of the contract. Also called a letter of credit.

2. 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.

3. 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.

4. [Net Accounts Receivable/(Revenue/356)]

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

6. Revenues of the organization earned in non-healthcare related activities.

7. An approach to analyzing the financial condition of an organization based on ratios calculated from line items found in the financial statements. There are four major categories of ratios: liquidity - profitability - capitalization - and activity.

8. [Total assets/Net Assets]

9. [(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

10. Each service center

11. The revenue and expense budgets of an organization.

12. Traces indirect costs to activity that uses them. Overhead collected in pools and distributed to cost object by cost drivers.

13. Organizational units responsible for their own costs that provide administrative support to other organizational units or the organization

14. A certificate attached to a bond representing the amount of interest to be paid to the holder.

15. The expenses incurred from an organization's operating activities.

16. A section of the statement of cash flows used to report such activities as borrowing and paying back loans.

17. [total revenues/net plant & equipment]- This ratio measures the number of dollars generated for each dollar invested in an organization's plant and equipment.

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

19. [operating income/total operating revenues]- The proportion of profit remaining after subtracting total operating expenses from operating revenues.

20. Costs (such as rent - administration - insurance - etc. that are shared by a number of services or departments and cannot easily be broken down to the services attributable to each (surgery - emergency medicine - etc.). Also called joint costs.

21. An assignment or grading of the likelihood that an organization will not default on a bond.

22. 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.

23. The difference between the initial amount paid for an investment and the related future cash inflows after they have been adjusted (discounted) by the cost of capital.

24. (excess of revenues over expenses/total assets)- A measure of how much profit is earned for each dollar invested in assets. In for-profit organizations it is called return on assets and is calculated as: net income/assets.

25. 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.

26. Irregular cash flows - typically occurring at the end of the life of a project.

27. The cumulative amount of depreciation recognized on an asset since its purchase. An asset's book value is equal to its purchase price less the amount of accumulated depreciation.

28. Budgets that typically cover two to five years.

29. I) The cost to borrow money. It can be expressed in dollars or as a percentage. 2) Payment to creditors for the use of money on credit.

30. Full-time equivalent employees. Two half-time employees equal one FTE.

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

32. Organizational units responsible for providing services and controlling their costs. There are two major types: clinical cost centers and administrative cost centers.

33. A form of long-term financing whereby the issuer receives cash and in return issues a note called a bond. By issuing the bond - the issuer agrees to make principal and/or interest payments on specific dates to the holders of the bond.

34. The total amount of multiyear debt due in future years.

35. Ratios that answer the question: How well is the organization positioned to meet its short-term obligations?

36. The ability of an organization to find new ways to operate that obviate the need for certain classes of costs - such as doing procedures on an outpatient rather than inpatient basis.

37. Generally - assets that will be used or consumed within one year. Some organizations use a period of less than one year.

38. Recording expenses associated with making revenue at the same time as revenues are recognized

39. IA category of non-current assets not intended to be used for operations - but only for capital appreciation and dividends - and that will be held for a period longer than one year.

40. Current assets. Net working capital equals current assets current liabilities.

41. The degree to which standards are met.

42. 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.

43. A legal obligation to pay the holder of the note or lien.

44. A technique to evaluate an organization's strengths - weaknesses - opportunities - and threats. Also called a WOTS-up analysis.

45. The amount of inventory on hand at the beginning of an accounting period. See also Ending inventory.

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

47. The unit of service which we wish to know the cost for (hospital admission - classroom hour - course - etc.)

48. A budget in which line items are presented by program.

49. The revenue that the organization has a right to collect. It is computed as: gross patient service revenues contractual allowance and charity care.

50. Decisions regarding the relative amount of debt and equity used to finance the organization's non-current assets.