Question 1

The Fairway health plan is a for-profit health plan that issues stock. The following data was taken from Fairway's financial statements:

Current assets.....$5,000,000 -

Total assets.....$6,000,000 -

Current liabilities.....$2,500,000

Total liabilities.....$3,600,000

Stockholders' equity.....$2,400,000

Fairway's total revenues for the previous financial period were $7,200,000, and its net income for that period was $180,000.

For the previous financial period, Fairway's net profit margin was:

Options :

A : 2.50%

B : 3.00%

C : 3.60%

D : 7.50%

Answer: A

Question 2

The Jasmine Company, which self-funds the health plan for its 200 employees, has established a 501(c)(9) trust as a means of addressing possible claims fluctuations under the health plan. This plan is not a part of a collective bargaining process.

A potential disadvantage to Jasmine of using a 501(c)(9) trust is that:

Options :

A : The cost of maintaining the trust may be prohibitive to Jasmine

B : The trust must always maintain enough assets to pay the health plan-s claims that have been incurred but not yet paid

C : Jasmine is prohibited from earning any return on the trust assets

D : The contributions to this trust are not deductible for federal income tax purposes

Answer: A

Question 3

Companies typically produce three types of budgets: operational budgets, cash budgets, and capital budgets. The following statements are about operational budgets. Select the answer choice containing the correct statement.

Options :

A : Expense budgets, a type of operational budget, typically describe fixed expenses rather than variable expenses.

B : Operational budgets can only show information by department or by line of business.

C : Operational budgets begin with a forecast of sales revenue and investment income.

D : Revenue budgets, a type of operational budget, indicate the amount of income from operations that a company received from the previous budget period

Answer: C

Question 4

If the Ascot health plan's accountants follow the going-concern concept under GAAP, then these accountants most likely:

Options :

A : Assume that Ascot will pay its liabilities immediately or in full during the current accounting period

B : Defer certain costs that Ascot has incurred, unless these costs contribute to the health plan-s future earnings

C : Assume that Ascot is not about to be liquidated, unless there is evidence to the contrary

D : Value Ascot-s assets more conservatively than they would under SAP

Answer: C

Question 5

A health plan's costs can be classified as committed costs or discretionary costs. An example of a discretionary cost for a health plan is the cost of its:

Options :

A : Facilities

B : Executive salaries

C : Employee training

D : Equipment

Answer: A