Financial Management and Business Strategy Flashcards
7 cards from real CPE practice questions. Tap to flip, then mark Knew It or Still Learning — missed cards come back until you master them.
Read the first 7 Financial Management and Business Strategy flashcards as text
A health system's operating margin has declined from 4.2% to 1.8% over two years. The most appropriate first step for the physician executive is to:
Answer: Conduct a detailed variance analysis comparing budget to actuals
Variance analysis identifies where actual performance deviates from budget, pinpointing the root causes of margin decline before interventions are made.
Porter's Five Forces model applied to a regional hospital system would include analysis of:
Answer: Threat of substitute services such as urgent care centers
Porter's Five Forces examines competitive forces including threat of substitutes, which in healthcare includes alternative care settings.
Which financial statement would a physician executive review to assess whether a hospital can meet its short-term obligations?
Answer: Balance sheet
The balance sheet shows current assets and current liabilities, from which liquidity ratios like the current ratio can be calculated.
A hospital's days cash on hand drops to 18 days. This is most concerning because:
Answer: It suggests the hospital may struggle to cover near-term operating expenses
Days cash on hand below 30 days is generally considered a warning sign that the organization may be unable to sustain operations if revenue is disrupted.
In a zero-based budgeting process, department managers are required to:
Answer: Justify every line item from scratch each budget cycle
Zero-based budgeting requires departments to build their budgets from zero each year, justifying every expenditure regardless of prior-year spending.
A physician executive is evaluating a joint venture with a surgery center. The primary financial concern unique to joint ventures is:
Answer: Alignment of financial incentives and profit distribution among partners
Joint ventures require clear agreements on profit sharing and aligned incentives; misaligned expectations are the most common source of joint venture failure.
Which of the following is the best indicator of long-term financial sustainability for a not-for-profit hospital?
Answer: Consistent positive operating margin over multiple years
Sustained positive operating margins allow a not-for-profit hospital to reinvest in facilities, technology, and mission-driven programs over time.