CMM Financial Management 2

Question 1

Which financial metric measures the percentage of each revenue dollar remaining after paying variable costs?

Accepted Answer

Contribution margin ratio

Answer

The contribution margin ratio is calculated as (Revenue - Variable Costs) / Revenue, showing what portion of each dollar contributes to fixed costs and profit.

Question 2

A medical practice's accounts receivable days outstanding (ARDO) increased from 42 to 58 days. What does this MOST likely indicate?

Accepted Answer

Slower collections or billing problems

Answer

An increasing ARDO signals that it is taking longer to collect payments, which may indicate billing errors, payer delays, or inadequate follow-up processes.

Question 3

Under accrual accounting, when is revenue recognized in a medical practice?

Accepted Answer

When services are rendered

Answer

Accrual accounting recognizes revenue when services are delivered, regardless of when payment is actually received.

Question 4

Which budgeting approach requires managers to justify every expense from zero each budget cycle?

Accepted Answer

Zero-based budgeting

Answer

Zero-based budgeting starts from a 'zero base' each period, requiring justification for all expenditures rather than simply adjusting prior-year figures.

Question 5

A practice is evaluating a new EMR system costing $200,000. If the expected annual savings are $50,000, what is the simple payback period?

Accepted Answer

4 years

Answer

Simple payback period = Initial Investment / Annual Savings = $200,000 / $50,000 = 4 years.

(CMM) Certified Medical Manager Practice Test

(CMM) Certified Medical Manager Practice Test

CMM Financial Management 2