Unit 2 Understanding finances

Question 1

How is the value of a PTs work calculated? What does this translate to in terms of determination of a PTs salary?

Answer 1

(# of pts seen) x (average reimbursement/visit) = total amount of value
salary also takes into account the other costs of the business so it won’t be based off how much money you bring in

Question 2

What is the greatest expense for any business and what does that include?

Answer 2

labor costs
*salary
*wages
*benefits
*payroll taxes
*payroll expenses: works comp, contributions to taxes (2% of total labor costs)
*owner’s salary

Question 3

How do you determine the Cost Per Session?
a. Direct Cost per session:
b. Indirect Cost per session:
c. How does this help you determine profit?

Answer 3

a. Direct Cost per session: total direct costs (labor cots + equipment loans + clinic supplies) / average number of treatment sessions = average direct cost per treatment session
b. Indirect Cost per session: add al the indirect costs (rent, utilities, office supplies, phone, internet) / estimated total # of treatment sessions = average indirect cost per treatment session
c. How does this help you determine profit? your income would need to be larger than both costs combined

Question 4

How do you determine Net Income?

Answer 4

revenue - variable cots - fixed costs

Question 5

How do you determine Profit Margin Ratio?

Answer 5

net income / revenue

Question 6

What is the Profit Margin Ratio for this scenario?
a. Revenue: $1,000,000
b. Variable Costs: $500,000
c. Fixed Costs: $200,000

Answer 6

net income = 1,000,000 - 500,000 - 200,000 = 300,000
PMR = 300,000/1,000,000 = 30%

Question 7

What is the Net Income Per Treatment for this scenario?
a. Revenue per treatment: $150.00
b. Variable costs per treatment: $82.50
c. Fixed Costs per treatment: $20.00

Answer 7

150.00 - 82.50 - 20 = 47.50

Question 8

How do you determine workload based on Net Income per treatment? From question #7, determine the # of treatments needed to have $100,000 of net income: (per treatment net income = 47.50

Answer 8

• desired net income / per treatment net income
• 100,000/47.50 = 2,105.30

Question 9

What is an FTE?

Answer 9

hours worked by one employee on a full-time bases
2,080 hours = 8 hours a day

Question 10

What is the Break-Even Point? How do you calculate it? How can it be helpful?

Answer 10

*point at which revenue equals expenses
* expenses = fixed costs per month + variable costs
* gross revenue = revenue per session x # of session
* can help improve revenue income