Deck 4: Financial Statement Analysis

Question 1

Analyzing financial statements helps a health care organization to:

A) Determine if profitable
B) Determine the effectiveness in collecting receivables
C) a & b
D) None of the above

Answer 1

a & b

Question 2

Approaches to analyze financial statements do not include:

A) Ratio analysis
B) Collateral analysis
C) Vertical analysis
D) Horizontal analysis

Answer 2

Collateral analysis

Question 3

Trend analysis compares changes over:

A) 3 month period
B) 6 month period
C) 1 year period
D) Each year with the base year

Answer 3

Each year with the base year

Question 4

Vertical analysis answers which general question?

A) What percentage of one line item is another line item?
B) Which analysis is best to use in financial decision making?
C) What is the percentage change in a line item from one year to the next?
D) Which financial statement is best to use in financial decision making?

Question 5

Categories of ratios include:

A) Liquidity ratios
B) Profitability ratios
C) Capital Structure ratios
D) All of the above

Question 6

Vertical analysis is also called:

A) Trend analysis
B) Financial leverage analysis
C) Common-size analysis
D) Activity cost analysis

Question 7

Which of the following is not a point to consider when using and interpreting ratios?

A) No one ratio is necessarily better than any other ratio
B) With benchmarking, it is not necessary to make sure the same formula is used
C) A ratio can best be interpreted relative to a benchmark
D) Ensuring reliability of data

Question 8

Liquidity ratios measure:

A) A facility's ability to meet short term obligations, collect receivables and maintain cash position
B) Operating revenues per adjusted discharge
C) Operating expense per adjusted discharge
D) Salary and benefit expense

Question 9

Operating margin ratio measures:

A) How dependent the organization is on patient related income
B) Profits earned from the organization's main line of business
C) How much profit is earned for each dollar invested in assets
D) Total operating expenses incurred from providing patient care services

Question 10

Age of Plant ratio provides:

A) An indication of the average age of a hospital's plant and equipment
B) An evaluation of the most productive assets
C) For every dollar invested in assets
D) Overall efficiency of the organizations assets

Question 11

Horizontal analysis looks at the percentage change in a line item from one quarter to another.

Question 12

Vertical analysis looks at the percentage change in a line item from one year to the next.

Question 13

Trend analysis compares changes over a year period.

Question 14

Ratio analysis is the expression of the relationship between two numbers as a single number.

Question 15

Activity ratios answer the question of how profitable the organization is.

Question 16

Age of Plant ratio complements the fixed asset turnover ratio.

Question 17

Capital structure ratios address how an organization's assets are financed and able to take on new debt.

Question 18

Net assets to total assets ratio reflects an organization's ability to repay a loan.

Question 19

Fixed asset turnover ratio aids in the evaluation of the most productive assets, plant and equipment.

Question 20

Higher debt increases financial risk by magnifying the returns on net asset or equity.