Saudi Electronic University

HCM 213

Chapter 4

Multiple Choice

1)Analyzing financial statements helps a health care organization to:

1. 1. Determine if profitable
   2. Determine the effectiveness in collecting receivables
   3. a & b
   4. None of the above
2. Approaches to analyze financial statements do not include:
   1. Ratio analysis
   2. Collateral analysis
   3. Vertical analysis
   4. Horizontal analysis
3. Trend analysis compares changes over:
   1. 3 month period
   2. 6 month period
   3. 1 year period
   4. Each year with the base year

4. Vertical analysis answers which general question?
   1. What percentage of one line item is another line item?
   2. Which analysis is best to use in financial decision making?
   3. What is the percentage change in a line item from one year to the next?
   4. Which financial statement is best to use in financial decision making?
5. Categories of ratios include:
   1. Liquidity ratios
   2. Profitability ratios
   3. Capital Structure ratios
   4. All of the above
6. Vertical analysis is also called:
   1. Trend analysis
   2. Financial leverage analysis
   3. Common-size analysis
   4. Activity cost analysis
7. Which of the following is not a point to consider when using and interpreting ratios?
   1. No one ratio is necessarily better than any other ratio
   2. With benchmarking, it is not necessary to make sure the same formula is used
   3. A ratio can best be interpreted relative to a benchmark
   4. Ensuring reliability of data
8. Liquidity ratios measure:
   1. A facility’s ability to meet short term obligations, collect receivables and maintain cash position
   2. Operating revenues per adjusted discharge
   3. Operating expense per adjusted discharge
   4. Salary and benefit expense
9. Operating margin ratio measures:
   1. How dependent the organization is on patient related income
   2. Profits earned from the organization’s main line of business
   3. How much profit is earned for each dollar invested in assets

9. 4. Total operating expenses incurred from providing patient care services
10. Age of Plant ratio provides:
    1. An indication of the average age of a hospital’s plant and equipment
    2. An evaluation of the most productive assets
    3. For every dollar invested in assets
    4. Overall efficiency of the organizations assets

True or False

1. Horizontal analysis looks at the percentage change in a line item from one quarter to another. True or False?

2. Vertical analysis looks at the percentage change in a line item from one year to the next. True or False?

3. Trend analysis compares changes over a year period. True or False?

4. Ratio analysis is the expression of the relationship between two numbers as a single number. True or False?

5. Activity ratios answer the question of how profitable the organization is. True or False?

6. Age of Plant ratio complements the fixed asset turnover ratio. True or False?

7. Capital structure ratios address how an organization’s assets are financed and able to take on new debt. True or False?

8. Net assets to total assets ratio reflects an organization’s ability to repay a loan. True or False?