Chapter 5

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SummerXParadise
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245636
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Chapter 5
Updated:
2013-11-07 09:28:15
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budget
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  1. Cash Equivalent
    Interest-bearing savings and checking account
  2. What are the four phases of the working capital cycle?
    • 1. Obtain cash
    • 2. Purchase resources and pay bills
    • 3.Provide services
    • 4. Billing and collections
  3. Commitment Fee
    A percentage of the unused portion of a credit line that is charged to the potential borrower
  4. Revolving line of credit
    An agreement established by the bank and the borrower that legally requires the bank to loan money to the borrower at any time requested up to the pre-negotiated limit
  5. Normal line of credit
    An agreement established by a bank and a borrower that establishes the maximum amount of funds that could be borrowed and the bank may loan the funds at its own discretion
  6. Approximate interest rate
    The annual interest rate incurred by not taking advantage of a supplier's discount offer to pay bills early.
  7. Claims Scrubbing
    The process of ensuring that billing claims contain all information required by an insurer before it will submit payment
  8. Lockbox
    A post office box located near a federal reserve bank or branch that for a fee will pick up and process checks quickly
  9. Required cash balance
    The amount of cash an organization must have on hand at the end of the current period to ensure that it has enough cash to cover the expected outflows during the next forecasting period
  10. Aging Schedule
    A table that shows the percentage of receivables outstanding by the month they were incurred
  11. Collateral
    A tangible asset that is pledged as a promise to repay a loan. If the loan is not paid, the lending institution as legal recourse may seize the pledged asset
  12. Factoring
    Selling accounts receivable at a discount, usually to a financial institution
  13. What are the 3 major reasons for a health care provider to hold cash
    • 1.Daily operations
    • 2. Precautionary purposes
    • 3.Speculative purposes
  14. Compensating Balance
    A designated dollar amount on deposit with a bank that a borrower is required to maintain
  15. Effective interest rate
    The true interest rate that a borrower pays
  16. Transaction Note
    A short term unsecured loan made for some specific purpose
  17. Trade Credit
    Short-term credit offered by the suppliers of a good or service to the purchaser
  18. Trade Payables
    Short-term debt that results from supplies purchased on credit for a given length of time. This allows an organization to use the supplier's money to pay for the purchase up until the time it pays the supplier the amount owed
  19. Asset Mix
    The amount of working capital an organization keeps on hand relative to its potential working capital obligations
  20. Financing Mix
    How an organization chooses to finance its working capital needs
  21. Liquidity
    A measure of how easily an asset can be converted into cash
  22. Working capital
    Current assets and current liabilities
  23. Working Capital Strategy
    How much extra working capital an organization determines it must keep as a cushion
  24. Net working capital
    The difference between current assets and current liabilities
  25. Health Insurance Portability and Accountability Act (HIPAA)
    A public law designed to improve efficiency in health care delivery by standardizing EDI and by protection the confidentiality and security of health data by setting and enforcing recognized standards
  26. Aggressive Approach
    The health care organization attempts to maximize returns by investing excess funds in expectedly higher-earning non-liquid assets such as buildings and equipment
  27. Conservative approach
    HCO seeks to minimize its risk of having insufficient short-term funds by maintaining higher liquidity
  28. What are the main sources of temporary cash?
    Bank loans and extension of credit from suppliers (i.e., trade payables)
  29. What is an unsecured loan and two types of unsecured bank loans?
    • Not backed by an asset.
    • Lines of credit & transaction notes
  30. Identify two problems that can delay the billing process?
    • Patients who use more than one name or name changes.
    • Address changes or no address or phone number on file

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