CHE Financial Management 1 — Questions and Answers
Question 1: Which financial statement provides a snapshot of an organization's assets, liabilities, and equity at a specific point in time?
- Income statement
- Statement of cash flows
- Balance sheet (Correct answer)
- Statement of retained earnings
Correct answer: Balance sheet
The balance sheet (statement of financial position) reports an organization's assets, liabilities, and net assets or equity at a specific date.
Question 2: In hospital finance, 'days cash on hand' measures:
- Daily revenue collected
- How many days an organization can operate using only its existing cash and liquid investments (Correct answer)
- Average payment processing time
- Daily patient census
Correct answer: How many days an organization can operate using only its existing cash and liquid investments
Days cash on hand calculates how long an organization could sustain operations using available cash and short-term investments without any incoming revenue.
Question 3: A hospital's operating margin is calculated as:
- Total revenue divided by total assets
- Operating income divided by total operating revenue (Correct answer)
- Net income divided by total equity
- Total expenses divided by patient days
Correct answer: Operating income divided by total operating revenue
Operating margin = operating income (revenue minus operating expenses) divided by total operating revenue, expressed as a percentage.
Question 4: Medicare's Diagnosis-Related Group (DRG) payment system reimburses hospitals based on:
- Actual costs incurred for each patient
- A fixed payment per case based on the patient's diagnosis and procedure (Correct answer)
- The number of days the patient is hospitalized
- The number of services provided during the stay
Correct answer: A fixed payment per case based on the patient's diagnosis and procedure
The DRG system pays hospitals a fixed, predetermined amount per inpatient case based on the patient's diagnosis and procedure, regardless of actual costs.
Question 5: Accounts receivable days (A/R days) in healthcare indicates:
- How many days until vendor payments are due
- The average number of days it takes to collect payment after providing services (Correct answer)
- Daily revenue volume
- Number of claims submitted per day
Correct answer: The average number of days it takes to collect payment after providing services
A/R days measures how long it takes on average to collect payment after a service is rendered — lower A/R days indicate more efficient revenue cycle performance.
Question 6: A capital budget in healthcare organizations is used to plan for:
- Annual operating expenses like salaries and supplies
- Major long-term investments in equipment, facilities, and technology (Correct answer)
- Monthly cash flow management
- Employee benefit costs
Correct answer: Major long-term investments in equipment, facilities, and technology
The capital budget plans for significant long-term investments in assets like buildings, major medical equipment, and information technology systems.
CHE Financial Management 1
Which financial statement provides a snapshot of an organization's assets, liabilities, and equity at a specific point in time?