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ACCA Financial Management

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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. (tax exempt revenue bonds)- Bonds in which the interest payments to the investor are exempt from the IRS. These bonds must be issued by an organization that has received tax exemption from the IRS and be used to fund projects that qualify as "exempt

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

3. The system of accounting that recognizes revenues when cash is received and expenses when cash is paid out. See also Accrual basis of accounting.

4. An organization's financial obligations that are to be paid within one year.

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

6. One of the four major financial statements. It summarizes the organization's revenues and expenses during an accounting period as well as other items that affect its unrestricted net assets. It is analogous to - but different from - an income stateme

7. The degree to which standards are met.

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

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

10. Assets = Liabilities + Net Assets (aka Equity).

11. A schedule detailing the principal and interest payments required to repay a loan. Typically - the periodic payments remain unchanged - but the proportion used to payoff the principal increases over time.

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

13. 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.

14. The amount remaining after subtracting variable costs from revenues. When the organization is not at capacity - it is the "profit" the organization makes on providing each new unit that is available to cover all other costs. Contribution margin may b

15. Each service center

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

17. The budget used to forecast operating expenses.

18. process of measuring the resources (costs) used to produce results.

19. The income (operating revenues -operating expenses) earned in non-health-care related activities.

20. Service center costs are allocated to both mission centers and other service centers

21. [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?

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

23. Organizational units primarily responsible for ensuring that services are provided to a population in a manner that meets the volume and quality requirements of the organization. Service centers are the most basic type of responsibility centers.

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

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

26. An amount owed to the organization that will not be paid. Charity care is not considered a bad debt since nothing is owed to the organization for services provided.

27. Setting aside cash to meet unexpected demands - such as unexpected maintenance of a facility or piece of equipment.

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

29. The budget used to forecast - and in some cases justify - the expenditures (and in some cases the sources of financing) for non-current assets.

30. The difference between current assets and current liabilities.

31. A method of allocating costs that are not directly paid for (utilities - rent - administration) into those products or services to which payment is attached (day of care - a brief visit). See also Activity-based costing.

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

33. Proceeds lost by foregoing other opportunities.

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

35. [current assets/current liabilities].- This liquidity ratio measures the proportion of all current assets to all current liabilities to determine how easily current debt can be paid off. It is one of the most commonly used ratios.

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

37. A borrower's assets on which a lender has legal claim if a borrower defaults on a loan.

38. 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.

39. The section of the statement of cash flows that reports the total change in cash and cash equivalents over the accounting period.

40. [(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

41. An organization whose profits can be distributed outside the organization and must pay taxes. Also called investor-owned organizations.

42. 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.

43. Ratios that measure how the organization's assets are financed and/or whether the organization can take on new debt.

44. The amount of supplies used to provide a service or good.

45. Directly related to the purposes of the organization and the delivery of services

46. (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.

47. Assets that provide service for a period exceeding one year. Sometimes referred to as long-term assets.

48. The rate of return required to undertake a project. Also called the hurdle rate or discount rate.

49. A measure of the resources used to generate revenue and/or provide a service. Often used synonymously with costs. See also Costs.

50. Demonstrates the ability to pay off long term debt