Financial Management and Budgeting Flashcards
7 cards from real CVPM practice questions. Tap to flip, then mark Knew It or Still Learning — missed cards come back until you master them.
Read the first 7 Financial Management and Budgeting flashcards as text
Which financial ratio measures a veterinary practice's ability to pay short-term obligations using only its most liquid assets?
Answer: Quick ratio
The quick ratio excludes inventory from current assets, providing a stricter measure of short-term liquidity than the current ratio.
A veterinary practice has total monthly expenses of $45,000 and cash reserves of $135,000. What is the practice's cash runway?
Answer: 3 months
Cash runway equals cash reserves divided by monthly burn rate: $135,000 ÷ $45,000 = 3 months.
Which budgeting method starts from zero each period and requires justification for all expenditures rather than using the prior year as a baseline?
Answer: Zero-based budgeting
Zero-based budgeting builds the budget from scratch each cycle, requiring managers to justify every line item regardless of historical spending.
What does accounts receivable turnover ratio indicate in a veterinary practice?
Answer: How quickly the practice collects payment from clients
Accounts receivable turnover measures how many times per year a practice collects its average accounts receivable balance, reflecting collection efficiency.
A practice owner wants to evaluate the profitability of adding a dental suite. Which financial analysis method projects the time needed to recover the initial investment?
Answer: Payback period analysis
Payback period analysis calculates how long it will take for net cash inflows from the investment to equal the initial capital outlay.
In veterinary practice accounting, which inventory valuation method assumes the most recently purchased items are sold first?
Answer: LIFO (Last In, First Out)
LIFO assumes the last items purchased are the first ones sold, which can affect cost of goods sold and taxable income differently than FIFO.
Which expense category in a veterinary practice budget typically includes wages, salaries, payroll taxes, and employee benefits?
Answer: Staff costs
Staff costs encompass all compensation-related expenses including wages, salaries, employer payroll taxes, health insurance, and retirement contributions.