Financial Management and Budgeting Flashcards

Which financial statement shows a facility's assets, liabilities, and owner's equity at a specific point in time?

Answer: Balance sheet

The balance sheet is a snapshot of financial position at a single date, following the equation assets = liabilities + equity.

An ALF administrator wants to know whether the facility can meet its short-term obligations. Which ratio is most useful?

Answer: Current ratio

The current ratio compares current assets to current liabilities, measuring short-term liquidity.

Under accrual accounting, when should a facility record revenue for care services provided in June but paid for in July?

Answer: In June, when the service was provided

Accrual accounting recognizes revenue when it is earned, not when cash is received.

A resident's family disputes a charge and refuses to pay a $2,000 balance the facility determines is uncollectible. How should this be recorded?

Answer: As a bad debt expense

Uncollectible resident accounts are written off as bad debt expense.

Which strategy is most appropriate for an administrator facing a projected cash shortfall in the next 60 days?

Answer: Accelerate billing and collections while delaying non-essential purchases

Speeding up cash inflows and deferring discretionary outflows manages a shortfall without violating legal obligations.

What does the term 'per resident day' (PRD) cost measure in facility financial analysis?

Answer: Average cost of operating the facility for one resident for one day

PRD divides costs by total resident days to allow comparison of efficiency across time periods and facilities.

During budget preparation, an administrator projects census will rise from 85% to 90% occupancy. Which expense category should be adjusted upward as a direct result?

Answer: Variable costs such as food and care supplies

Variable costs rise with census, while property taxes, mortgage, and depreciation remain fixed.