C428 Financial Resource Management in Healthcare
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Free C428 Financial Resource Management in Healthcare Questions
The average collection period is computed by dividing
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net credit sales by ending gross accounts receivable
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net credit sales by average gross accounts receivable
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the accounts receivable turnover by 365 days
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365 days by the accounts receivable turnover
Explanation
What is the primary purpose of a Chart of Accounts in a healthcare organization?
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To provide a detailed inventory of medical supplies
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To categorize and organize all financial accounts used in the business
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To track employee performance and productivity
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To outline the organization's mission and vision statements
Explanation
A Chart of Accounts (COA) is a systematic listing of all financial accounts used by an organization. In healthcare, the COA categorizes accounts such as assets, liabilities, revenues, and expenses, allowing for accurate recording, reporting, and analysis of financial transactions. It provides a structured framework that ensures consistency in financial reporting, facilitates budgeting, and supports decision-making by giving management a clear view of the organization’s financial activities.
An information systems audit...
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examines the reliability and integrity of financial transactions, account records, and financial statements.
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reviews the controls of an AIS to assess its compliance with internal control policies and procedures and its effectiveness in safeguarding assets.
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is concerned with the economical and efficient use of resources and the accomplishment of established goals and objectives.
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examines incidents of possible fraud, misappropriation of assets, waste and abuse, or improper governmental activities.
Explanation
An information systems (IS) audit evaluates the controls, security, and reliability of an organization's automated information systems, including accounting information systems (AIS). Its primary purpose is to assess compliance with internal control policies, ensure the accuracy and integrity of financial data, and verify that assets are properly safeguarded. This type of audit helps organizations identify weaknesses in their systems and implement corrective measures to maintain operational and financial integrity.
What does EBITA stand for?
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Earnings Before Interest, Taxes, and Amortization
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Earnings Before Interest, Taxes, and Adjustments
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Earnings Before Interest, Taxes, and Appreciation
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Earnings Before Interest, Taxes, and Acquisition costs
Explanation
Which of the following actions can lead to an extension of the statute of limitations on a debt collection?
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Filing a lawsuit without prior notice
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Obtaining a written 'promise to pay'
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Waiting for the debt to become uncollectible
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Ignoring the account until it is resolved
Explanation
Obtaining a written "promise to pay" from a debtor can legally extend the statute of limitations for collecting a debt. This acknowledgment restarts the clock on the legal period within which a creditor can sue to recover the owed funds. Courts recognize written promises or partial payments as valid actions that revive or extend the enforceable period for debt collection, ensuring the creditor retains legal rights to pursue payment.
What does an aging report show?
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The length of time that has passed since a charge was posted to an account
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Patient demographic information sorted by age
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The success of patient treatments sorted by patient age
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The length of time a practice has accepted a particular type of insurance
Explanation
An aging report is a financial document that categorizes accounts receivable based on how long invoices have been outstanding. It shows the length of time that has passed since a charge was posted to a patient’s account or billed to a payer. This report helps healthcare administrators identify overdue accounts, prioritize collections, and manage cash flow effectively by highlighting which accounts require immediate attention.
What action must a creditor take immediately upon receiving a notification of a Chapter 7 bankruptcy filing from a debtor?
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Initiate a new payment plan with the debtor
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Flag the patient account
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Suspend all collection activity
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Continue normal collection efforts
Explanation
Upon receiving a notification of a Chapter 7 bankruptcy filing, creditors are required by law to immediately suspend all collection activities. This includes halting phone calls, letters, or any attempts to collect the debt, as the automatic stay goes into effect. The stay protects the debtor from any further collection efforts while the bankruptcy proceedings determine the dischargeability of debts.
In the context of healthcare financial management, what term is used to describe an account receivable that is deemed unlikely to be collected due to the debtor's inability to pay?
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Accounts Payable
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Bad Debt
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Contractual Discount
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Days of Care
Explanation
Bad debt refers to accounts receivable that a healthcare organization considers uncollectible due to the patient’s or debtor’s inability to pay. These amounts are written off as expenses, reflecting the realistic expectation that not all billed amounts will be collected. Tracking bad debt is important for accurate financial reporting and managing the organization’s overall revenue and cash flow.
What is the primary purpose of establishing a funded depreciation account in a healthcare organization?
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To increase the overall retained earnings of the organization
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To allocate funds specifically for the acquisition of new capital assets
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To reduce the taxable income of the organization
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To improve cash flow by delaying capital expenditures
Explanation
A funded depreciation account is established to set aside financial resources specifically for the replacement or acquisition of new capital assets as existing assets wear out or become obsolete. In healthcare organizations, this ensures that funds are available to maintain and upgrade essential equipment, facilities, and technology without relying on operational cash flow or incurring debt. It supports long-term financial planning and sustainability by systematically funding future capital expenditures.
What does the Average Days of Revenue in Accounts Receivable (ADRR) indicate in a healthcare financial management context?
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The average time it takes to collect payments from patients
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The total amount of bad debt in a fiscal year
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The average number of days a patient stays in the hospital
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The total revenue generated from services rendered
Explanation
The Average Days of Revenue in Accounts Receivable (ADRR) measures the efficiency of a healthcare facility in collecting payments from patients and third-party payers. It represents the average number of days it takes for the facility to convert accounts receivable into cash. Monitoring ADRR helps administrators assess cash flow performance and identify delays in collections, which can impact financial stability.
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