Questions and Answers of Financial Management

In your view, which of the assumptions used in the models is most likely to invalidate them?
What type of risk is initially assessed?
Briefly describe sensitivity analysis.
What type of risk does it attempt to measure?
Is sensitivity analysis a good risk assessment tool? If not, what is its value in the capital budgeting process?
Briefly describe scenario analysis.
What type of risk does it attempt to measure?
What are its strengths and weaknesses?
Briefly, what is Monte Carlo simulation?
What are two ratios that measure debt management?
What are two ratios that measure asset management?
How can comparative and trend analyses be used to interpret ratio results?
Explain how the Du Pont equation combines several ratios to obtain an overview of a business's financial condition.
Why may a focus on operating revenue and operating income be preferable to a focus on total revenues and net income?
What is the difference between financial statement analysis and operating indicator analysis?
Why is operating indicator analysis important?
Describe four indicators that are commonly used in operating indicator analysis.
Briefly describe some of the problems encountered when performing financial statement analysis and operating indicator analysis.
Explain how inflation effects created problems in the Bayside illustration.
What is EVA, and how is it measured?
Why is EVA a better measure of financial performance than are accounting measures such as earnings per share and return on equity?
What does EVA tell managers about how to achieve good financial performance?
Why is it important to be familiar with the comparative data set?
What is a KPI? A dashboard?
How are KPIs and dashboards used in financial condition analysis?
Briefly describe the nature and use of the following corporate planning tools:a. Missionb. Goalsc. Objectives
Why do financial planners need to be familiar with the business's strategic plan?
What is the purpose of a business's operating plan?
What is the most common time horizon for operating plans?
Briefly describe the contents of a typical operating plan.
What are the five steps of the financial planning process?
What are two approaches to the total operating revenue forecast?
Discuss some factors that must be considered when developing an operating revenue forecast.
Why is it necessary for planners to distinguish between volume changes and reimbursement changes?
What is the starting point from which forecasted financial statements are created?
Briefly describe the mechanics of the constant growth forecasting method.
Why is the external financing plan so important in the planning process?
Do you think most healthcare businesses use the constant growth method to develop pro forma financial statements, or do you think they use some other methodology?
How do the following factors affect the external financing requirement?a. Projected revenue growth rateb. Capacity utilizationc. Capital intensityd. Profitabilitye. Dividend policy (for
Describe several conditions under which the constant growth method can produce questionable results.
Do these conditions often exist in real-world forecasting?
Identify several techniques that can be used instead of constant growth forecasting.
Which techniques do you think produce the most accurate forecasts? Which techniques do you think are the most costly to use?
Why do computerized forecasting models play such an important role in corporate management?
What are the purposes of a financial control system?
What basic financial control tools do businesses use, and how do they work?
What is float, and how do businesses use it to increase cash management efficiency?
What are some methods that businesses can use to accelerate receipts? To control disbursements?
How should cash management actions be evaluated?
Considering all the information in projected financial statements, why do organizations need a cash budget?
Do managers need to have extensive knowledge of accounting principles to create a cash budget?
In your view, what is the most important line of the cash budget?
Why do businesses hold marketable securities?
Why are these securities preferred?
What is the revenue cycle?
What four phases make up the cycle?
Why is proper management of the revenue cycle critical to the financial performance of healthcare providers?
Explain how a firm's receivables balance is built up over time and why there are costs associated with carrying receivables.
Briefly discuss two metrics used to monitor overall revenue cycle performance.
What are some of the unique problems healthcare providers face in revenue cycle management?
Why is good supply chain management important to a business's success?
Describe some recent trends in supply chain management by healthcare providers.
What is meant by the term spontaneous financing?
What are accruals, and what should a business's policy be regarding the use of accrual financing?
How should businesses determine the amount of trade credit they should use?
What is the difference between free and costly trade credit?
What type of risk does it attempt to measure?
What are its strengths and weaknesses?
Describe qualitative risk assessment.
Why does a qualitative risk assessment work?
Assume a quantitative risk assessment has been conducted on a project. Is a qualitative risk assessment necessary?
What are the differences between the CE and RADR methods for risk incorporation?
What assumptions about time and risk are inherent in the RADR method?
How do most businesses incorporate differential risk into the capital-budgeting decision process?
How did Ridgeland's managers translate the MRI project's standalone risk assessment into a corporate risk assessment?
How was risk incorporated into the MRI project decision process?
Is the risk adjustment objective or subjective?
What is a project cost of capital?
Discuss the advantages and disadvantages of incorporating debt capacity differences into the capital budgeting decision process.
Why are some projects evaluated on the basis of present value of costs?
Is there any difference between the risk adjustments applied to cash inflows and cash outflows? Explain your answer.
Can differential risk adjustments be made to single cash flows, or must the same adjustment be made to all of a project's cash flows?
How can the possibility of abandonment affect a project's profitability and stand-alone risk?
What are the costs and benefits of structuring large capital budgeting decisions in stages rather than in a single decision?
Why might DCF valuation underestimate the true value of a project?
What are some different types of real options?
How does the presence of real options influence capital budgeting decisions?
Describe a typical capital budgeting decision process.
Are decisions made solely on the basis of quantitative factors? Explain your answer.
From a financial perspective, how are projects chosen when capital rationing exists?
What is the profitability index, and why is it useful in a capital rationing situation?
What are two ratios that measure liquidity?
What are two ratios that measure profitability?
What is the purpose of ratio analysis?
What types of information are contained in the notes to a business's financial statements?
What is the difference between net income and cash flow, and which is more meaningful to a firm's financial condition?
What type of information does each type of statement provide?
Briefly describe these three basic financial statements: (1) Income statement, (2) Balance sheet, and (3) Statement of cash flows.
What governs financial reporting requirements in health services?
What are some securities that are commonly held as marketable securities?

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