Financial Management & Budgeting Flashcards

Which cost is an example of a variable expense in a veterinary practice?

Answer: Cost of vaccines and medications used per patient

Variable costs fluctuate directly with the volume of services provided, such as drugs and supplies consumed per patient visit.

What is the purpose of a capital expenditure budget in a veterinary practice?

Answer: To plan for major long-term asset purchases such as equipment and facility improvements

A capital expenditure (CapEx) budget plans for significant investments in assets that will provide value over multiple years.

If a practice's current ratio is 0.8, what does this indicate?

Answer: The practice may have difficulty meeting short-term obligations

A current ratio below 1.0 means current liabilities exceed current assets, signaling potential difficulty paying short-term debts.

Which pricing strategy involves setting fees based on the total cost of providing a service plus a desired profit margin?

Answer: Cost-plus pricing

Cost-plus pricing calculates the full cost of delivering a service and adds a predetermined profit markup to set the fee.

A practice manager is reviewing a budget variance report. An unfavorable variance in the labor cost line most likely means:

Answer: Actual labor costs exceeded the budgeted amount

An unfavorable (negative) variance indicates actual costs were higher than budgeted, which is a concern for expense management.

Which financial metric best indicates how much revenue is generated per full-time equivalent (FTE) veterinarian?

Answer: Revenue per FTE

Revenue per FTE veterinarian is a productivity metric that benchmarks how much revenue each full-time equivalent doctor generates.

In veterinary practice accounting, 'accrual basis' accounting records revenue:

Answer: When the service is earned, regardless of when payment is received

Accrual accounting recognizes revenue when services are performed, not when cash is collected, providing a more accurate financial picture.