Post-Assessment
1. Which one of the following statements about accrual accounting is incorrect?
a. It is appropriate for the not-for-profit sector
b. Revenues are not deferred
c. Expenses can be deferred
d. It is not appropriate for larger companies
2. Skywire telecommunications equipment company has invested heavily in the past fiscal year to upgrade its manufacturing equipment so that the company can take advantage of newer and more efficient technology. In Skywire’s year-end income statement, the upgrade expenditure is presented as:
a. Cost of goods sold
b. Operating Expense
c. Depreciation Expense
d. Interest Expense
3. Which one of the following would be recorded as a liability on your company’s balance sheet?
a. Wages paid to the staff at the distribution plant
b. Purchase price of the plant’s forklist trucks
c. The inventory at the plant
d. The company’s working capital
4. Gerry is chief financial officer of Worldwide Semiconductor. In reviewing World wide’s latest cash flow projections, he learns that cash is going to be tight. In seeking ways to revamp operations to improve future cash flow, Gerry asks a senior manager to assemble relevant financial reports and statements. Later, he notices that one of the documents sent to him is not appropriate for his requirements. Which item is not useful to him?
a. Information on a division’s inventory
b. Information on all equipment purchases
c. Profit-and-loss statement
d. Information on stock issues and dividends
5. Geordie is head of operations for a bulk-food and consumer-goods retail company. When he returns to work from a vacation, he wants to acquaint himself with the company’s current financial; position. Which financial statement should Geordie look at?
a. Income Statement
b. Cash flow statement
c. Balance Sheet
d. SWOT analysis
6. James is North American sales director for a warehpuse-style clothing and office-supply retailer. James relies on the fast sales of his limited number of products to maintain his low prices and sustain a healthy cash flow. Which of the following operating ratios is most useful to James?
a. Asset turnover
b. Days inventory
c. Days Payables
d. Quick ratio
7. A retreat of departmental managers to sort out conflicts that arise from competition over limited resources could occur as part of…
a. Bottom-up budgeting
b. SWOT analysis
c. Top-down budgeting
d. Valuation
8. Which of the following scenarios illustrates a best practice for preparing a budget?
a. Derek is research manager for Global Discoveries. In preparing his department’s budget, Derek finds it useful to work in the evening, free of distracting interactions with colleagues.
b. Bonnie has a filed entitles “Budget Diary.” Where she stores paperwork pertaining to her budget deliberations and assumptions
c. Ira plans to boost sales by reducing the retail price to its lowest level ever. Beacause the new price is substantially lower than last year’s, Ira decides not to base his budgetary assumptions and scenario’s on last year’s sales results.
d. In order to develop sound budgetary assumptions and projections, Wolfgang, a senior production manager at Mississauga Advertising, relies on his own extensive industry knowledge rather than depending on input from less experienced workers and subordinates.
9. The facility manager of Grand Auto Manufacturing is considering re-equipping the New Jersey assembly plant. The $90 million cost will produce an annual savings of $15 million over the eight-year expected lifetime of the machines. What is the payback period?
a. Two years
b. Three years
c. Six years
d. Nine years
10. When you evaluate a potential investment you need to get a more realistic picture of the anticipated benefits. Which of the following would you use to calculate the time value of money?
a. Payback period
b. Net present value
c. Return on investment
d. Cost/benefit analysis
11. As chief executive officer of Giant Chemical Corp., Manfred is contemplating acquiring a company that manufactures artificial he art valves and hip joints. To reach his decision, Manfred undertakes a breakeven analysis. Which of the following determinations represents the contribution portion of his analysis?
a. Money that can be used to pay the fixed costs.
b. Costs that are in dependent of product sales
c. Opportunity Cost
d. Variable costs
12. As a financial officer with an aircraft manufacturer, Rob begins tracking the financial performance of a new model of business jet. He notes an increase in equipment failure on the new assembly line in March. When the situation has not improved by June, Rob redirects funds available for other assembly lines towards the new jet’s assembly line. When Rob issues the next quarterly budget in September showing a decrease in expected performance of the new assembly line, senior managers express concerns. What is the likely reason behind senior management’s reaction? Rob failed to…
a. Ascertain whether the line problem was an aberration or a long-term issue.
b. Readjust his budget in light of new information.
c. Communicate with upper management
d. Regularly reassess the budget forecast

 

Name___________________________________

 

MULTIPLE CHOICE. Choose the one alternative that best completes the statement or answers the question.

 

1) Johnson, Inc. has just ended the calendar year making a sale in the amount of $10,000 of

merchandise purchased during the year at a total cost of $7,000. Although the firm paid in full for

the merchandise during the year, it has yet to collect at year end from the customer. The net profit

and cash flow from this sale for the year are

 

A) $3,000 and $7,000, respectively. B) $3,000 and -$7,000, respectively.

C) $3,000 and $10,000, respectively. D) $7,000 and -$3,000, respectively.

 

2) A firm has just ended its calendar year making a sale in the amount of $150,000 of merchandise

purchased during the year at a total cost of $112,500. Although the firm paid in full for the

merchandise during the year, it has yet to collect at year end from the customer. The net profit and

cash flow from this sale for the year are

 

A) $37,500 and -$112,500, respectively. B) $37,500 and -$150,000, respectively.

C) $0 and $150,000, respectively. D) $150,000 and $112,500, respectively.

 

TRUE/FALSE. Write ‘T’ if the statement is true and ‘F’ if the statement is false.

 

3) Dividend payments change directly with changes in earnings per share. F

 

MULTIPLE CHOICE. Choose the one alternative that best completes the statement or answers the question.

 

4) The primary goal of the financial manager is

 

A) minimizing risk. B) maximizing profit.

C) minimizing return. D) maximizing wealth.

 

5) A financial manager must choose between three alternative investments. Each asset is expected to

provide earnings over a three-year period as described below. Based on the wealth maximization

goal, the financial manager would

 

Year       Asset 1                  Asset 2                  Asset 3

1              $21,000                 $ 9,000                                 $15,000

2              15,000                   15,000                   15,000

3              9,000                      21,000                  15,000

$              45,000                   $45,000                 $45,000

 

A) choose Asset 1.

B) choose Asset 2.

C) choose Asset 3.

D) be indifferent between Asset 1 and Asset 2.

 

6) The ________ provides a financial summary of the firm’s operating results during a specified

period.

 

A) statement of cash flows B) balance sheet

C) income statement D) statement of retained earnings

 

7) Earnings available to common shareholders are defined as net profits

 

A) before taxes. B) after taxes minus common dividends.

C) after taxes. D) after taxes minus preferred dividends.

 

8) A firm had the following accounts and financial data for 2005.

Sales Revenue $3,060                       Cost of goods sold $1,800

Accounts Receivable 500                Preferred stock dividends 18

Interest expense 126                         Tax rate 40%

Total oper. expenses 600                 Number of shares of common 1,000

Accounts payable 240                           stocks outstanding

The firm’s earnings available to common shareholders for 2005 were ________.

 

A)     $302.40 B) $516.60 C) $195.40 D) -$224.25

 

ESSAY. Write your answer on a separate sheet of paper.

 

9) At the end of 2005, the Long Life Light Bulb Company announced it had produced a gross profit of $1 million.

The company has also established that over the course of this year it has incurred $345,000 in operating

expenses and $125,000 in interest expenses. The company is subject to a 30% tax rate and has declared $57,000

total preferred stock dividends.

 

(a) How much is the earnings available for common stockholders?

(b) Compute the increased retained earnings for 2005 if the company were to declare a $4.25 common stock

dividend. The company has 15,000 shares of common stock outstanding.

 

MULTIPLE CHOICE. Choose the one alternative that best completes the statement or answers the question.

 

10) The two basic measures of liquidity are

 

A) inventory turnover and current ratio. B) current ratio and total asset turnover.

C) gross profit margin and ROE. D) current ratio and quick ratio.

 

11) As a firm’s cash flows become more predictable,

 

A) the return on equity should increase. B) the current ratio should expand.

C) current liabilities should decrease. D) current assets should decrease.

 

12) If Nico Corporation has annual purchases of $300,000 and accounts payable of $30,000, then

average purchases per day are ________ and the average payment period is ________.

 

A)     821.9; 36.5 B) 833.3; 36.0 C) 36.0; 833.3 D) 36.5; 821.9

 

13) The ________ is a popular approach for evaluating profitability in relation to sales by expressing

each item on the income statement as a percent of sales.

 

A) source and use statement B) retained earnings statement

C) profit and loss statement D) common-size income statement

 

14) A firm with a gross profit margin which meets industry standard and a net profit margin which is

below industry standard must have excessive

 

A) principal payments. B) cost of goods sold.

C) general and administrative expenses. D) dividend payments.

 

15) Examples of sophisticated capital budgeting techniques include all of the following EXCEPT

 

A) annualized net present value. B) payback period.

C) net present value. D) internal rate of return.

 

16) A firm is evaluating a proposal which has an initial investment of $50,000 and has cash flows of

$15,000 per year for five years. The payback period of the project is

 

A)     1.5 years. B) 4 years. C) 3.3 years. D) 2 years.

B)

TRUE/FALSE. Write ‘T’ if the statement is true and ‘F’ if the statement is false.

 

17) If the NPV is greater than the cost of capital, a project should be accepted.

 

MULTIPLE CHOICE. Choose the one alternative that best completes the statement or answers the question.

18) A firm is evaluating three capital projects. The net present values for the projects are as follows:

Project                  NPV

1                              $100

2                              $0

3                       $100

The firm should

 

A) accept Projects 1 and 2 and reject Project 3.

B) accept Projects 1 and 3 and reject Project 2.

C) reject all projects.

D) accept Project 1 and reject Projects 2 and 3.

 

19) What is the NPV for the following project if its cost of capital is 15 percent and its initial after tax

cost is $5,000,000 and it is expected to provide after-tax operating cash inflows of $1,800,000 in year

1, $1,900,000 in year 2, $1,700,000 in year 3 and $1,300,000 in year 4?

 

A) $1,700,000. B) ($137,053).

C) $371,764. D) None of the above.

 

TRUE/FALSE. Write ‘T’ if the statement is true and ‘F’ if the statement is false.

 

20) If its IRR is greater than the cost of capital, a project should be accepted.

 

MULTIPLE CHOICE. Choose the one alternative that best completes the statement or answers the question.

 

21) What is the IRR for the following project if its initial after tax cost is $5,000,000 and it is expected to

provide after-tax operating cash inflows of $1,800,000 in year 1, $1,900,000 in year 2, $1,700,000 in

year 3 and $1,300,000 in year 4?

 

A) 13.57%. B) 15.57%.

C) 0.00%. D) None of the above.

 

ESSAY. Write your answer in the space provided or on a separate sheet of paper.

22) Tangshan Mining Company is considering investing in a new mining project. The firm’s cost of capital is 12 percent and the project is expected to have an initial after tax cost of $5,000,000. Furthermore, the project is expected to provide after-tax operating cash flows of $2,500,000 in year 1, $2,300,000 in year 2, $2,200,000 in year 3 and ($1,300,000) in year 4?

 

(a) Calculate the project’s NPV.

(b) Calculate the project’s IRR.

(c) Should the firm make the investment?

 

MULTIPLE CHOICE. Choose the one alternative that best completes the statement or answers the question.

 

23) Generally the least expensive source of long-term capital is

 

A) short-term debt. B) retained earnings.

C) long-term debt. D) preferred stock.

 

24) A firm has determined its cost of each source of capital and optimal capital structure, which is

composed of the following sources and target market value proportions:

Target Market

Source of Capital              Proportions         After-Tax Cost

Long-term debt                  40%                        6%

Preferred stock                   10                           11

Common stock equity      50                           15

The weighted average cost of capital is

 

A)     15 percent. B) 11 percent. C) 6 percent. D) 10.7 percent.

 

ESSAY. Write your answer in the space provided or on a separate sheet of paper.

25) Promo Pak has compiled the following financial data:

Source of Capital              Book Value         Market Value    Cost

Long-term debt                  $10,000,000         $8,500,000           5.0%

Preferred stock                   1,000,000              1,500,000              14.0

Common stock equity      9,000,000              15,000,000           20.0

$20,000,000         $25,000,000

 

(a) Calculate the weighted average cost of capital using book value weights.

(b) Calculate the weighted average cost of capital using market value weights.

 

TRUE/FALSE. Write ‘T’ if the statement is true and ‘F’ if the statement is false.

 

26) An increase in current assets increases net working capital, thereby reducing the risk of technical

insolvency.

 

MULTIPLE CHOICE. Choose the one alternative that best completes the statement or answers the question.

 

27) Net working capital is defined as

 

A) current assets minus current liabilities.

B) current liabilities minus current assets.

C) a ratio measure of liquidity best used in cross-sectional analysis.

D) the portion of the firm’s assets financed with short-term funds.

 

28) The goal of working capital management is to

 

A) pay off short-term debts.

B) achieve a balance between short-term and long-term assets so that they add to the

achievement of the firm’s overall goals.

C) achieve a balance between risk and return in order to maximize the firm’s value.

D) balance current assets against current liabilities.

 

29) The two major sources of short-term financing are

 

A) accounts receivable and notes payable. B) accounts payable and accruals.

C) a line of credit and accruals. D) a line of credit and accounts payable.

 

TRUE/FALSE. Write ‘T’ if the statement is true and ‘F’ if the statement is false.

 

30) Fixed assets are the most desirable short-term loan collateral since they normally have a longer life,

or duration, than the term of the loan.

 

FIN/331 Final Exam 1

Towson University

Department of Finance

Principles of Financial Management (FIN331)

Exam I

 

Name_____________________________

ID#_________________

 

 

1.             Which of the following statements is CORRECT?

a.     One of the advantages of the corporate form of organization is that it avoids double taxation.

b.     It is easier to transfer one’s ownership interest in a partnership than in a corporation.

c.     One of the disadvantages of a sole proprietorship is that the proprietor is exposed to unlimited liability.

d.     One of the advantages of a corporation from a social standpoint is that every stockholder has equal voting rights, i.e., “one person, one vote.”

e.      Corporations of all types are subject to the corporate income tax.

 

2.             Which of the following is NOT to address the agency conflict between shareholders and managers?

a.     Maximize sales

b.     Monitor managers’ activities

c.     Give incentives based on performance

d.     Offer stock shares or stock options

e.     Hostile takeover threat

 

3.             What is the main advantage of S-corp relative to C-corp?

a.     Profit margin

b.    Single taxation

c.     Limited liability

d.     Dividend policy

e.     Capital structure

 

4.             Which of the following mechanisms would be most likely to help motivate managers to act in the best interests of shareholders?

a.     Decrease the use of restrictive covenants in bond agreements.

b.     Take actions that reduce the possibility of a hostile takeover.

c.     Elect a board of directors that allows managers greater freedom of action.

d.     Increase the proportion of executive compensation that comes from stock options and reduce the proportion that is paid as cash salaries.

e.     Eliminate a requirement that members of the board of directors have a substantial investment in the firm’s stock.

 

5.             If the projected net earnings is $5m and the dividend payout ratio is 60%, what is the projected retained earnings at the end of the next year if the retained earnings at the end of this year is $10m?

a.    $6m

b.    $9m

c.    $10m

d.    $11m

e.    $12m

 

6.             Which of the following items is NOT normally considered to be a current asset?

a.     Accounts receivable.

b.     Inventory.

c.     Bonds.

d.     Cash.

e.     Short-term, highly-liquid, marketable securities.

 

7.             The following information for Towsontown, Inc. is provided:

Net Sales:                                $88,000

Operating Costs:                     $72,000 (doesn’t include depreciation)

Depreciation Expense:             $  7,200 (no amortization charges occurred)

Debt:                                       $40,000

Interest Rates:                          10% Annual

Tax Rate:                                 34%

How much net cash flow did Woodley generate over the past year?

a.     $3,168

b.     $3,268

c.     $10,168

d.     $10,368

e.     $11,368

 

8.             Houston Pumps recently reported $185,250 of sales, $140,500 of operating costs other than depreciation, and $9,250 of depreciation.  The company had $35,250 of outstanding bonds that carry a 6.75% interest rate, and its income tax rate was 35%.  In order to sustain its operations and thus generate future sales and cash flows, the firm was required to spend $15,250 to buy new capital expenditure and to invest $6,850 in net working capital.  What was the firm’s free cash flow?

a.     $10,225

b.     $10,736

c.     $11,273

d.     $11,837

e.     $12,429

               

9.             Corporations face the following tax schedule:

Tax on Base                                   Percentage on

Taxable Income                                       of Bracket                                 Excess above Base

Up to $50,000                                                                             $0                                        15%

$50,000-$75,000                                                                    7,500                                        25

$75,000-$100,000                                                                13,750                                        34

$100,000-$335,000                                                              22,250                                        39

 

Company Z has $80,000 of taxable income from its operations, $5,000 of interest income, and $30,000 of dividend income from preferred stock it holds in other corporations.  What is Company Z’s tax liability (For dividend, 70% is excluded from the taxable income. Taxable income for dividend is Dividend income*(1 – Dividend exclusion %))?

a.     $17,328

b.     $18,240

c.     $19,200

d.     $20,210

e.     $21,221

 

10.           A company expects sales to increase during the coming year, and it is using the AFN equation to forecast the additional capital that it must raise.  Which of the following conditions would cause the AFN to increase?

a.     The company previously thought its fixed assets were being operated at full capacity, but now it learns that it actually has excess capacity.

b.     The company increases its dividend payout ratio.

c.     The company begins to pay employees monthly rather than weekly.

d.     The company’s profit margin increases.

e.     The company decides to stop taking discounts on purchased materials.

 

11.           Chua Chang & Wu Inc. is planning its operations for next year, and the CEO wants you to forecast the firm’s additional funds needed (AFN).  Data for use in your forecast are shown below.  Based on the AFN equation, what is the AFN for the coming year?

 

Last year’s sales = S0                                              $200,000        Last year’s accounts payable                               $50,000

Sales growth rate = g                                                       40%        Last year’s notes payable                                    $15,000

Last year’s total assets = A*0                                  $135,000        Last year’s accruals                                             $20,000

Last year’s profit margin = M                                       20.0%        Target payout ratio                                                25.0%

 

a.     -$14,440

b.     -$15,200

c.     -$16,000

d.     -$16,800

e.     -$17,640

 

12.           Which of the following statements is NOT CORRECT?

a.     When a corporation’s shares are owned by a few individuals, we say that the firm is “closely, or privately, held.”

b.     “Going public” establishes a firm’s true intrinsic value and ensures that a liquid market will always exist for the firm’s shares.

c.     The stock of publicly owned companies must generally be registered with and reported to a regulatory agency such as the SEC.

d.     When stock in a closely held corporation is offered to the public for the first time, the transaction is called “going public, or an IPO,” and the market for such stock is called the new issue or IPO market.

e.     It is possible for a firm to go public and yet not raise any additional new capital for the firm itself.

 

13.           Which is a common way to compare financial ratios against other companies in the same industry?

a.     Time-Trend

b.     Cross-sectional

c.     Internal uses

d.     Benchmark

e.     None of the above

 

14.           Considered alone, which of the following would increase a company’s current ratio?

a.     An increase in net fixed assets.

b.     An increase in accrued liabilities.

c.     An increase in notes payable.

d.     An increase in accounts receivable.

e.     An increase in accounts payable.

 

15.           Towson, Inc. currently has $1,600,000 in accounts receivables and its days sales outstanding (DSO) is 20 days. If accounts receivable comprise 50% of the company’s current assets and Towson has $4,800,000 in net fixed assets, what is its total asset turnover ratio?

a.     2.651x

b.     3.650x

c.     3.520x

d.     2.921x

e.      3.920x

 

16.           Dell has an inventory period of 1 month, and an account receivable period of 0 (zero) months. It also has a payable period of 6 months. What are the cash conversion cycle period and the interest expense for Dell if they have annual net total (credit) sales volume of $10 billion? The market interest rate is 6.0%.

a.     -5.0, $-250 m

b.      6.0, $300m

c.      1.0, $100m

d.      3.0, $150m

e.      0.0, $100m

 

17.           Ryngard Corp’s sales last year were $38,000, and its total assets were $16,000.  What was its total assets turnover ratio (TAT)?

a.     2.04

b.     2.14

c.     2.26

d.     2.38

e.     2.49

 

18.           If your mark up ratio is 25%, what is the margin ratio?

a.     15%

b.     20%

c.     25%

d.     28%

e.     30%

 

19.           Last year Rennie Industries had sales of $305,000, assets of $175,000, a profit margin of 5.3%, and an equity multiplier of 1.2.  The CFO believes that the company could reduce its assets by $51,000 without affecting either sales or costs.  Had it reduced its assets by this amount, and had the debt ratio, sales, and costs remained constant, how much would the ROE have changed?

a.     4.10%

b.     4.56%

c.     5.01%

d.     5.52%

e.     6.07%

               

 

20.          Which ratio may be greatly affected by the choice of short-term and long-term debt for a given amount of total debt?

a.     Debt ratio

b.     Profit margin

c.     TIE

d.     Quick ratio

e.     TAT

 

21.           Cook, Inc. has a current ratio of 1.8x on current liabilities of $200,000. The firm has $36,000 of inventories. The firm will issue notes payable and use those funds to buy new inventories to meet the inventory requirement for the expansion. Cook’s debt holders specifies that it must maintain a quick ratio at least 1.20x, or else it is in default. How much new inventory can Cook raise before it violates its bond contracts?

a.     $70,000

b.     $80,000

c.     $90,000

d.     $72,000

e.     $30,000

 

22.           Money markets are markets for

a.     Foreign currencies.

b.     Consumer automobile loans.

c.     Common stocks.

d.     Long-term bonds.

e.     Short-term debt securities such as Treasury bills and commercial paper.

 

23.           Which of the following statements is CORRECT?

a.     If you purchase 100 shares of Disney stock from your brother-in-law, this is an example of a primary market transaction.

b.     If Disney issues additional shares of common stock through an investment banker, this would be a secondary market transaction.

c.     The NYSE is an example of an over-the-counter market.

d.     Only institutions, and not individuals, can engage in derivative market transactions.

e.     As they are generally defined, money market transactions involve debt securities with maturities of less than one year.

 

24.           Which one has nothing to do with IPO?

a.     New issues

b.     Secondary market

c.     An influx of capital to issuer

d.     Investment Banks possibly underwriting

e.     Public offering

 

 

25.           Which of the following statements is CORRECT?

a.     The most important difference between spot markets versus futures markets is the maturity of the instruments that are traded.  Spot market transactions involve securities that have maturities of less than one year whereas futures markets transactions involve securities with maturities greater than one year.

b.     Capital market transactions involve only preferred stock or common stock.

c.     If General Electric were to issue new stock this year, this would be considered a secondary market transaction since the company already has stock outstanding.

d.     Both Nasdaq dealers and “specialists” on the NYSE hold inventories of stocks.

e.     Money market transactions do not involve securities denominated in currencies other than the U.S. dollar.

 

 

Complete guide to the following exercises

Exercise 8-1

Exercise 8-2

Exercise 8-3

Exercise 9-1

Exercise 9-2

 

Exercise 8–1: FIFO and LIFO Inventory(Study the FIFO and LIFO explanations in the chapter).

a1.    Use the format in Exhibit 8–1 below to compute the ending FIFO inventory and the cost of goods sold, assuming $90,000 in sales; beginning inventory 500 units @ $50; purchases of 400 units @ $50; 100 units @ $65; 400 units @ $80.

a2.      Also compute the cost of goods sold percentage of sales.

b1.    Use the format in Exhibit 8–2 below to compute the ending LIFO inventory and the cost of goods sold, using same assumptions.

b2.    Also compute the cost of goods sold percentage of sales.

c.      Comment on the difference in outcomes.

 

Assignment Exercise 8–2: Inventory Turnover

Study the “Calculating Inventory Turnover” portion of the chapter closely, whereby the cost of goods sold divided by the average inventory equals the inventory turnover.

Compute two inventory turnover calculations as follows:

1.      Use the LIFO information in the previous assignment to first compute the average inventory and then to compute the inventory turnover.

2.      Use the FIFO information in the previous assignment to first compute the average inventory and then to compute the inventory turnover.

Assignment Exercise 8–3: Depreciation Concept

Assume that MHS purchased two additional pieces of equipment on April 1 (the first day of its fiscal year), as follows:

1.         The laboratory equipment cost $300,000 and has an expected life of = years. The salvage value is 5% of cost. No equipment was traded in on this purchase.

2.         The radiology equipment cost $800,000 and has an expected life of 7 years. The salvage value is 10% of cost. No equipment was traded in on this purchase.

For both pieces of equipment:

1.         Compute the straight-line depreciation.

2.         Compute the double-declining balance depreciation.

 

*Assignment Exercise 9–1: FTEs to Annualize Staffing

The Metropolis Health System managers are also working on their budgets for next year. Each manager must annualize his or her staffing plan, and thus must convert staff net paid days worked to a factor. Each manager has the MHS worksheet, which shows 9 holidays, 7 sick days, 15 vacation days, and 3 education days, equaling 34 paid days per year not worked.

The Laboratory is fully staffed 7 days per week and the 34 paid days per year not worked is applicable for the lab. The Medical Records department is also fully staffed 7 days per week. However, Medical Records is an outsourced department so the employee benefits are somewhat different. The Medical Records employees receive 9 holidays plus 21 personal leave days, which can be used for any purpose.

1.      Compute net paid days worked for a full-time employee in the Laboratory and in Medical Records.

2.      Convert net paid days worked to a factor for the Laboratory and for Medical Records so these MHS managers can annualize their staffing plans.

*Assignment Exercise 9–2: FTEs to Fill a Position

Metropolis Health System (MHS) uses a basic work week of 40 hours throughout the system. Thus, one full-time employee works 40 hours per week. MHS also uses a standard 24-hour scheduling system of three 8-hour shifts. The Director of Nursing needs to compute the staffing requirements to fill the Operating Room (OR) positions. Since MHS is a trauma center, the OR is staffed 24 hours a day, 7 days a week. At present, staffing is identical for all 7 days of the week, although the Director of Nursing is questioning the efficiency of this method.

The Operating Room department is staffed with two nursing supervisors on the day shift and one nursing supervisor apiece on the evening and night shifts. There are two technicians on the day shift, two technicians on the evening shift, and one technician on the night shift. There are three RNs on the day shift, two RNs on the evening shift, and one RN plus one LPN on the night shift. In addition, there is one aide plus one clerical worker on the day shift only.

1.      Set up a staffing requirements worksheet, using the format in Exhibit 9–4 above.

 

2.      Compute the number of FTEs required to fill the Operating Room staffing positions.