Questions and Answers of Financial Management

What are some important issues confronting hospitals today?
What is the difference between the goals of investor-owned and not-for-profit firms?
What is the agency problem, and how does it apply to investor-owned firms?
What factors tend to reduce the agency problem?
Briefly explain the individual (personal) and corporate income tax systems.
What is the difference in individual tax treatment between interest and dividend income?
What are capital gains and losses, and how are they differentiated from ordinary income?
What is unrelated business income?
How do federal income taxes treat dividends received by corporations compared to dividends received by individuals?
With regard to investor-owned businesses, do tax laws favor financing by debt or by equity? Explain your answer.
Briefly describe the MACRS tax depreciation system.
What is the effect of the sale of a depreciable asset on a firm's taxes?
Briefly describe the major changes under the ACA.
What are the major implications of health reform for the financial management of healthcare organizations?
Briefly explain the following characteristics of insurance:a. Pooling of lossesb. Payment only for random lossesc. Risk transferd. Indemnification
What is adverse selection, and how do insurers deal with the problem?
What are the two major classifications of health insurers?
Briefly describe some different types of private insurers.
Briefly describe the origins and purpose of Medicare.
What is Medicaid, and how is it administered?
Roughly, what is the allocation of an HMO premium dollar?
Briefly describe the following three methods for developing capitation rates:a. Fee-for-service methodb. Cost approachc. Demographic approach
Of the three approaches, which one do you think would be the most accurate? The easiest to apply in practice?
Explain the difference between the total PMPM and a premium rate.
What are the two components of CDHPs, and how do they work together?
What are some advantages of HSAs over HRAs?
What perverse healthcare market incentives are created by traditional indemnity insurance?
What is the main finding from the RAND experiment, and how do CDHPs apply it?
What rationales are used to promote CDHP use?
How could CDHPs affect providers?
What are the goals of these insurance designs?
Briefly describe the impact of the ACA on health insurance.
Briefly describe the coding system used in hospitals (ICD codes) and medical practices (CPT codes).
What is the link between coding and reimbursement?
Briefly describe the following reimbursement methods:a. Cost basedb. Charge based and discounted chargesc. Per procedured. Per diagnosise. Per diemf. Bundled (global)g. Capitation
What is the major difference between fee-for-service and capitation?
What financial incentives to providers are created by each of the following reimbursement methods:a. Cost basedb. Charge based and discounted chargesc. Per procedured. Per diagnosise. Per
What is the major difference between the financial incentives to providers of fee-for-service and capitation?
What financial risks to providers are created by each of the following reimbursement methods?a. Cost basedb. Charge based and discounted chargesc. Per procedured. Per diagnosise. Per
What is the major difference between the financial risks to providers of fee-for-service and capitation payment systems?
What is the IPPS, and how does it work?
What is the OPPS, and how does it work?
How are physicians reimbursed for providing services to Medicare patients?
What is the aim of a value-based purchasing program designed by an insurer?
What are four dimensions of quality that can define performance in a value-based purchasing scheme?
What are three ways of allocating value-based purchasing rewards?
What is the role of IT in a value-based purchasing program?
On what kinds of performance standards are the largest value-based purchasing initiatives basing their awards?
Briefly describe the impact of the health reform on payments to providers.
Draw a three-year time line that illustrates the following situation: an investment of $10,000 at time 0; inflows of $5,000 at the end of years 1, 2, and 3; and an interest rate of 10 percent during
What is compounding? What is interest on interest?
What is the basic equation for calculating the future value of a lump sum?
What are three solution techniques for solving lump-sum compounding problems? Which technique is the most efficient?
What is meant by the power of compounding?
What is discounting? How is it related to compounding?
What are the three techniques for solving lump-sum discounting problems?
What is the basic equation for calculating the present value of a lump sum?
How does the present value of an amount to be received in the future change as the payment date is extended and the interest rate increases?
Why does an investment have an opportunity cost rate even when the employed funds have no explicit cost?
How are opportunity cost rates established?
Does the opportunity cost rate depend on the source of the investment funds?
What are some real-world situations that may require you to solve for interest rate or time?
What is the Rule of 72, and how is it used?
Which annuity has the greater future value: an ordinary annuity or an annuity due? Why?
Which annuity has the greater present value: an ordinary annuity or an annuity due? Why?
Give two examples of financial decisions that typically involve uneven cash flows.
Describe how present values of uneven cash flow streams are calculated using a spreadsheet.
What is meant by NPV?
What does ROI mean?
Differentiate between dollar return and rate of return.
Is the calculation of ROI an application of time value analysis? Explain your answer.
What changes must be made in the calculations to determine the future value of an amount being compounded at 8 percent semiannually versus one being compounded at 8 percent annually?
From an investor's standpoint, why is semiannual compounding better than annual compounding?
How does the EAR differ from the stated (nominal) rate?
When constructing an amortization schedule, how is the periodic payment amount calculated?
Does the periodic payment remain constant over time?
Do principal and interest remain constant over time? Explain your answer.
What complications arise when dealing with financial risk in a business setting?
What is the generic definition of risk?
Explain the concept of financial risk in general terms.
What are the implications of risk aversion for financial decision-making?
How are probability distributions used in financial decision-making?
How is the expected rate of return calculated?
Describe some financial distress costs.
How are financial distress costs related to the use of financial leverage?
What is a trade-off model of capital structure?
What are the implications of the trade-off models for capital structure decisions?
Does empirical evidence support the trade-off models?
Briefly explain the asymmetric information model of capital structure.
What does the model suggest about capital structure decisions?
Do the capital structure models provide managers with quantifiable guidance regarding optimal capital structures?
Summarize the information that capital structure models provide to decision makers.
Do the capital structure models apply to not-for-profit firms?
Why is capital structure important to not-for-profit firms?
Is the capital structure decision mostly objective or subjective?
What are some of the factors that managers must consider when setting a business's optimal capital structure?
Do the general prescriptions for capital structure decisions apply to small businesses? Explain your answer.
Why are capital budgeting decisions so crucial to the success of a business?
What are the benefits of effective capital budgeting procedures?
What is the primary advantage of classifying capital projects?

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