Financial Introduction

Question 1

What goes into a starting up fund

Answer 1

• Net worth = assets minus liabilities (debts)
• Banks & credit unions
• Personal loans
• Investors
• Cash

Question 2

Define financial plan

Answer 2

• Every step and part of the business plan in dollars

Question 3

Define debit and credit

Answer 3

• Debit = amount owed or amount that was paid
• Credit = amount received, income but also the ability of customer to receive goods/services based on future payment

Question 4

Describe assets

Answer 4

• For business: property, goods, equipment, buildings, land, investments, & retained earning
• For individuals: personal cash savings, interest on savings & investments

Question 5

Describe liabilities

Answer 5

• Monies the business owes to others & must continue to pay
• AKA costs of doing business
• Ex: rent, equipment lease, wages, & salaries

Question 6

Differences b/w capital equipment and supplies

Answer 6

• Equipment: major purchase, >$1,000, investment, lease vs buy
• Supplies: small items <$1,000, frequently purchased, necessary for the office or service provided

Question 7

Define return on investment (ROI)

Answer 7

• Time when the cumulative income (Net Revenue) finally overtakes the start up costs

Question 8

Estimate of minimal standards to help determine how much space you need

Answer 8

• Clinical staff 500 sq ft each
• Clerical staff 60 sq ft each
• Waiting room 100 sq ft
• Medical records 100 sq ft

Question 9

Describe depreciation

Answer 9

• Income tax deduction that is spread out over a time frame estimated life of the equipment (usually 10 years)
• Recorded as an expense item yearly & thus deducted off the taxable amount

Question 10

Describe income & reimbursement

Answer 10

• Money coming IN
• Insurance reimbursements
• Cash flow risk: lag time from when PT service is billed till the time business gets paid

Question 11

Describe costs/expenses

Answer 11

• Indirect coasts (Overhead): rent, utilities, cleaning services
• Direct costs: salaries, benefits, supplies, taxes
• Can have fixed & variable costs for each of the above

Question 12

Describe fixed vs variable costs/expenses

Answer 12

• Fixed: constant, ex. rent
• Variable: volume dependent, ex. supplies, linen, or electrodes

Question 13

Gross versus net revenue

Answer 13

• Gross: total income over a designated period
• Net: gross revenue minus expenses (what is left after paying bills)