CVPM Financial Management and Budgeting 5

Question 1

Which financial statement would a practice manager review to determine whether the practice owns more than it owes at a specific point in time?

Accepted Answer

Balance sheet

Answer

The balance sheet shows assets, liabilities, and owner's equity at a specific date, revealing whether total assets exceed total liabilities.

Question 2

A practice manager wants to reduce days sales outstanding (DSO). Which strategy would be most effective?

Accepted Answer

Implementing stricter collection policies and offering payment at time of service

Answer

Requiring payment at time of service and enforcing collection policies directly reduces the average number of days receivables remain outstanding.

Question 3

In a veterinary practice's chart of accounts, what type of account is 'unearned revenue' from prepaid wellness plans?

Accepted Answer

Liability

Answer

Prepaid wellness plan payments received before services are delivered represent a liability (unearned revenue) until the services are performed.

Question 4

What is the primary advantage of using a rolling 12-month budget compared to a traditional annual budget?

Accepted Answer

It always maintains a full year's forward-looking projection as each month passes

Answer

A rolling budget adds a new month as each month ends, ensuring managers always have a full 12-month forward view for planning purposes.

Question 5

A veterinary practice has $500,000 in total assets and $200,000 in total liabilities. What is the debt-to-asset ratio?

Accepted Answer

0.40

Answer

Debt-to-asset ratio = Total Liabilities ÷ Total Assets = $200,000 ÷ $500,000 = 0.40, meaning 40% of assets are financed by debt.

(CVPM) Certified Veterinary Practice Manager Practice Test