Financial Management & 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 & Budgeting flashcards as text
A practice manager is evaluating two equipment purchases using ROI. Equipment A has a 25% ROI and Equipment B has a 15% ROI over the same period. Assuming equal risk, which should be prioritized?
Answer: Equipment A, because it generates a higher return relative to its cost
All else being equal, Equipment A's higher ROI indicates it generates more return per dollar invested and should be prioritized.
In a veterinary practice, which expense category typically represents the largest portion of total operating costs?
Answer: Labor and staff compensation
Labor costs, including veterinarian and support staff salaries and benefits, typically account for 40–50% or more of total operating expenses.
A practice collects a $500 deposit for a costly procedure scheduled next month. Under accrual accounting, how should this be recorded?
Answer: As a liability (unearned revenue) until the service is performed
Under accrual accounting, deposits are recorded as liabilities (unearned revenue) until the service is delivered and revenue is earned.
Which of the following is a characteristic of a flexible budget, as opposed to a static budget?
Answer: It adjusts expense targets based on actual activity levels achieved
A flexible budget adjusts allowable costs based on actual volume or activity, making variance analysis more meaningful.
A veterinary practice has a debt-to-equity ratio of 2.5. What does this indicate?
Answer: The practice is financed primarily through debt relative to equity
A debt-to-equity ratio of 2.5 means creditors have provided $2.50 for every $1.00 of equity, indicating significant financial leverage.
Which action best demonstrates sound internal financial controls in a veterinary practice?
Answer: Separating the duties of authorizing payments, recording transactions, and reconciling accounts
Segregation of duties is a fundamental internal control that reduces the risk of fraud and errors by ensuring no single person controls all aspects of a financial transaction.
When conducting a fee analysis, a practice manager finds that a key service is priced 20% below the regional average but is the highest-volume service. The BEST immediate course of action is to:
Answer: Analyze cost structure and client price sensitivity before making incremental fee adjustments
Fee changes should be based on a thorough analysis of costs, client elasticity, and competitive positioning rather than immediate large adjustments.