CVPM Financial Management & Budgeting 2

Question 1

A veterinary practice has total revenue of $1,200,000 and cost of goods sold (COGS) of $360,000. What is the gross profit margin?

Accepted Answer

70%

Answer

Gross profit margin = (Revenue - COGS) / Revenue = ($1,200,000 - $360,000) / $1,200,000 = 70%.

Question 2

Which budgeting method starts from zero each period and requires managers to justify every expense?

Accepted Answer

Zero-based budgeting

Answer

Zero-based budgeting requires all expenses to be justified from scratch each budget cycle rather than using the prior year as a baseline.

Question 3

What does accounts receivable turnover ratio measure in a veterinary practice?

Accepted Answer

How efficiently the practice collects payments from clients

Answer

Accounts receivable turnover measures how many times per year the practice collects its average accounts receivable balance.

Question 4

A practice manager notices that drug and supply costs consistently exceed budget by 15%. Which action is MOST appropriate?

Accepted Answer

Investigate purchasing patterns and supplier pricing before adjusting the budget

Answer

Before making budget adjustments, the manager should analyze root causes such as waste, theft, or pricing discrepancies.

Question 5

Which financial statement shows the practice's assets, liabilities, and owner's equity at a specific point in time?

Accepted Answer

Balance sheet

Answer

The balance sheet (statement of financial position) provides a snapshot of what the practice owns, owes, and the owner's equity at a given date.

(CVPM) Certified Veterinary Practice Manager Practice Test