Quiz 11,12,13

Which of the following statements about the limitations of financial condition analysis is most correct?

A, B, and C are correct Comparison with industry averages is difficult if the organization operates in several different lines of business, Seasonal factors can distort ratios, and inflation effects can distort rations.

T or F: Under accrual accounting, all expenses reported on the income statement represent cash costs.

False

T or F: Under accrual accounting, all revenues reported on the income statement represent cash collections.

False

Assume that a business's balance sheet reports total assets of $500,000 and total liabilities of $300,000. Now assume that $20,000 of net fixed assets (net plant and equipment) are written off due to technological obsolescence. All else the same, what is the total equity of the business after the write-off?

$180,000 500,000-300,000= 200,000-20,000= $180,000

Grady Home Health has a profit margin of 15 percent on sales of $200,000. If the firm has debt of $7,500,000 and total assets of $22,500,000, What is Grady's return on assets (ROA)?

13.3%

A fire has destroyed a large percentage of the financial records of the Carter Health System. You have the task of piecing together information to prepare a financial report. You have found the profit margin to be 5.4 percent. If sales were 4 million dollars on total assets of 2 million dollars, and the amount of debt financing was 800,000 dollars, What was Carter's return on equity (ROE) (HInt: Use the Du Pont equation to answer this question.)

18%

White Memorial Hospital has a debt-to-equity ratio of 0.67. What is the hospital's debt ratio?

40%

Which of the following statements about the organization of the balance sheet is most correct?

A and B The balance sheet has upper and lower (or left and right sections.) Assets are divided in to current and long-term categories.

Which of the following statements concerning net income is most correct?

All of above. Net income is the bottom line of the income statement. Net income measures total profitability as defined by accounting rules and regulations. In not for profit businesses, the entire amount of net income is reinvested in the business.

Which of the following statements about financial condition analysis is most correct?

All of the above

Which of the following items are part of a business's set of financial statements?

All of the above Income, Balance, and statement of cash flows

Which of the following equations best describes the accounting identity?

Assets = Liabilities + Equity

Which of the following statements about income statement expenses is most correct?

Both B and C Supplies are expensed (shown) on the income statement when consumed (used to provide patient services) All lease expense is reported on the income statement.

Which of the following statements concerning depreciation expense is most correct?

Depreciation expense accounts for the loss of value of fixed assets (plant and equipment.)

Assume that the value of diagnostic equipment suddenly falls because of technological obsolescence. How is the balance sheet adjusted to preserve the accounting identity?

Equity is reduced.

T or F: Fund accounting is used by investor owned (for profit) businesses to differentiate between operating funds and retirement funds.

False

T or F: It is always quite easy to determine whether a given ratio value is "good" or "bad."

False

T or F: Like the income statement, the balance sheet reports the status of an organization over some period of time.

False

T or F: The primary difference between financial statement analysis and operating analysis is that operating analysis does not use bench-marking while financial statement analysis does.

False

T or F: The set of rules and regulations that govern the content and format of financial statements is called Government Accounting Procedures (GAP).

False

T or F: To create common size financial statements, all income statements items, and balance sheet accounts are divided by total assets.

False

Which of the following statements about cash versus accrual accounting is most correct?

In cash accounting, an event is recognized when a cash transaction occurs.

Which of the following statements about the income statement is most correct?

It reports the economic profitability of an organization.

KPI stands for:

Key Performance Indicator

Which of the following statements about revenue is most correct?

Net patient service revenue equals patient service revenue less provision for bad debts.

Suppose that two hospitals are identical in all ways except that Hospital N is relatively new while Hospital O is relatively old. Which of the following statements about a comparative financial statement analysis is most correct? (Hint: Think about the differences in the amount of net fixed assets carried on the balance sheet and the amount of depreciation expense reported on the income statement.)

None of the above statements are correct.

Which of the following statements about the balance sheet is most correct?

None of the above statements are correct.

Which of the following statements concerning accumulated depreciation is most correct?

None of the statements are correct.

Which of the following statements concerning operating income is most correct?

Operating income reports the profitability of a healthcare provider's core activities.

Consider the following balance sheet: Cash $70,000 Accounts payable $30,000 Accounts Receivable $30,000 Long term debt $20,000 Inventories $50,000 Common stock $20,000 Net fixed assets $350,000 Retained Earnings $250,000 Total assets $500,000 Total Liabilities and Equity $500,000 Which of the following statements is most correct?

The business, in the aggregated over time, has been profitable.

Consider the following balance sheet: Cash $70000 Accounts payable $30000 Accounts receivable $30000 Long-term debt $20000 Inventories $50000 Common stock $200000 Net Fixed Assets $350000 Retained earnings $250000 Total Assets $500000 Total liabilities and equity $500000 Assume that the business uses $10,000 of its cash to pay for supplies that were ordered on credit terms and have already been received and booked (recorded on the balance sheet.) Which of the below statements reflects the resulting balance sheet change?

The cash account decreases by $10,000 and the accounts payable account decreases by $10,000.

Consider the following balance sheet: Cash $70000 Accounts Payable $30000 Accounts Receivable $30000 Long term debt $20000 Inventories $50,000 Common Stock $200000 Net fixed assets $350000 Retained earnings $250,000 Total assets $500000 Total liabilities and equity $500000 Assume that the business uses $30000 of its cash to pay salaries. Which of the below statements reflects the resulting balance sheet change?

The cash account decreases by $30000 and retained earnings account is reduced by $30000.

Which of the following statements about financial statement analysis is most correct?

The current ratio measures liquidity.

Which of the following statements concerning the statement of cash flows is most correct?

The statement of cash flows uses information from both the income statement and the balance sheet.

T or F: In ratio analysis, a single value has little meaning. Therefore analysts use trends and comparative analysis to help "interpret the numbers."

True

T or F: The requirement to provide financial accounting information is drive by the need for outside stakeholders (primary investors) to have reliable information about the financial status of an organization.

True