Question

1. True or false? Charity care is reported in the notes for not-for-profit health care organizations, but revenues and expenses are not recorded in the operating statement.

2. True or false? Because auditors assess the internal controls of the organization, audited financial statements signify that fraud within the organization is not a concern.

3. Match the following types of ratios with their definitions.

Profitability

Liquidity

Solvency

Common size

Efficiency

1.	compares numbers on the balance sheet to total assets and numbers on operating statement to revenues.
2.	assess whether an organization is maintaining an adequate level of cash or near-cash assets.
3.	assess how well an organization manages its activities.
4.	assess the organization’s ability to meet its financial debt obligations (principal and interest).
5.	assess how well an organization did financially.

Answer 1

1. FALSE.

Since revenues and expenses are recorded in the operating statement.

2. FALSE

The statement is false as fraud is concern for the organization whether auditor provides an opinion on the Internal Controls or not.

3.

Profitability - assess how well an organization did financially. Liquidity -   assess whether an organization is maintaining an adequate level of cash or near-cash assets. Solvency - assess the organization’s ability to meet its financial debt obligations (principal and interest). Common size - compares numbers on the balance sheet to total assets and numbers on operating statement to revenues. Efficiency - assess how well an organization manages its activities.