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Sajjad1994
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Letter 1: I am worried about our cash flow for this month. The primary Updated on: 29 Oct 2023, 04:08
Originally posted by Sajjad1994 on 17 Sep 2022, 23:59.
Last edited by BottomJee on 29 Oct 2023, 04:08, edited 2 times in total.
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March 4, 2012, 1:12pm
From: Dr. Stacy Butler, DDS To: Mr. Mark Pontoni, CPA Mark,

I am worried about our cash flow for this month. The primary insurance provider carried by our patients is reducing what it pays per visit to us by 5%, and our number of appointments scheduled for this month is about 10% less than it was last year. Even with our costs unchanged from this time last year, I worry that we will not be able to meet our expenses. Please advise, Stacy.
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Dr. Butler’s projected March, 2012 revenues from toothbrush sales amount to greater than 15% of her total revenues from March, 2011.: No Mr. Pontoni believes that insurance reimbursements for dental visits will increase toward previous levels.: No If Dr. Butler’s office does not find ways to continue its revenues from the sale of dental supplies such as electric toothbrushes, it will fail to stay as profitable as it was in 2011.: No
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1. Which of the following conclusions can be logically drawn from the prompts?
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Dr. Butler’s projected March, 2012 revenues from toothbrush sales amount to greater than 15% of her total revenues from March, 2011.
Mr. Pontoni believes that insurance reimbursements for dental visits will increase toward previous levels.
If Dr. Butler’s office does not find ways to continue its revenues from the sale of dental supplies such as electric toothbrushes, it will fail to stay as profitable as it was in 2011.
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Dr. Butler’s projected March, 2012 revenues from toothbrush sales amount to greater than 15% of her total revenues from March, 2011.: No Mr. Pontoni believes that insurance reimbursements for dental visits will increase toward previous levels.: No If Dr. Butler’s office does not find ways to continue its revenues from the sale of dental supplies such as electric toothbrushes, it will fail to stay as profitable as it was in 2011.: No

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Letter 1: I am worried about our cash flow for this month. The primary 09 Mar 2024, 03:17
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For the statement 1 - "Dr. Butler’s projected March, 2012 revenues from toothbrush sales amount to greater than 15% of her total revenues from March, 2011.". It is mentioned in the details that Dr. Buttler is earning 0.95*0.9 (0.845) of the revenues of the March 2011 revenue and the consultant claims that earnings from toothbrush can compensate for the loss amount i.e. 0.155. So that means that the earnings from toothbrush would be more than 15% of the March 2011 revenue.
So, the answer for statement 1 would be Yes.

Sajjad1994 can you please check this one and let me know if my understanding is incorrect here.
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Letter 1: I am worried about our cash flow for this month. The primary 12 Mar 2024, 07:30
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Shrey~
For the statement 1 - "Dr. Butler’s projected March, 2012 revenues from toothbrush sales amount to greater than 15% of her total revenues from March, 2011.". It is mentioned in the details that Dr. Buttler is earning 0.95*0.9 (0.845) of the revenues of the March 2011 revenue and the consultant claims that earnings from toothbrush can compensate for the loss amount i.e. 0.155. So that means that the earnings from toothbrush would be more than 15% of the March 2011 revenue.
So, the answer for statement 1 would be Yes.

Sajjad1994 can you please check this one and let me know if my understanding is incorrect here.
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The information in the tabs simply tells us that the sales of toothbrushes will compensate for the losses from a lower number of visits and insurance payments; it didn't provide us with the details of the sales of toothbrushes for the previous year. Yes, it might compensate for 15% of the losses, but we have no data on its sales from last year. The statement compares this month's sales with the total sales in last year's month.
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Letter 1: I am worried about our cash flow for this month. The primary 14 Mar 2024, 03:16
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Hii Sajjad1994, can you please help me with No 2 and 3. Letter 1 has mentioned that patients will be dropped by 10% and payment by 5%. So only way to increase his revenue is by selling other items. Where am I going wrong?
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Letter 1: I am worried about our cash flow for this month. The primary 14 Mar 2024, 07:38
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Dhimanghosh1234
Hii Sajjad1994, can you please help me with No 2 and 3. Letter 1 has mentioned that patients will be dropped by 10% and payment by 5%. So only way to increase his revenue is by selling other items. Where am I going wrong?
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­Statement 2: Mr. Pontoni believes that insurance reimbursements for dental visits will increase toward previous levels.

This is example of half right and half wrong answer choice. The problem starts when it say "toward previous levels" The information given in the question did not validate whether the previous level will be met or not.

Answer: No

Statement 3: If Dr. Butler’s office does not find ways to continue its revenues from the sale of dental supplies such as electric toothbrushes, it will fail to stay as profitable as it was in 2011.

The second tab clearly states that:

"Also, your admin shared with me the appointment log for next month, and it looks as though this month’s problems are only a short term occurrence. I expect that you will be back on track for the rest of the year,"

Answer: No
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Letter 1: I am worried about our cash flow for this month. The primary 25 Mar 2024, 01:50
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Hi Shrey 
Your understanding is correct, but you have committed a calculation error. 

"It is mentioned in the details that Dr. Buttler is earning 0.95*0.9 (0.845 0.855) of the revenues of the March 2011 revenue"
0.95*0.9 = 0.855
So, the amount compensated by toothbrush sales is greater than or equal to 0.145 or 14.5%. It may or may not be more than 15%. 

Hence, the Answer is NO. 

Shrey1
For the statement 1 - "Dr. Butler’s projected March, 2012 revenues from toothbrush sales amount to greater than 15% of her total revenues from March, 2011.". It is mentioned in the details that Dr. Buttler is earning 0.95*0.9 (0.845) of the revenues of the March 2011 revenue and the consultant claims that earnings from toothbrush can compensate for the loss amount i.e. 0.155. So that means that the earnings from toothbrush would be more than 15% of the March 2011 revenue.
So, the answer for statement 1 would be Yes.

Sajjad1994 can you please check this one and let me know if my understanding is incorrect here.
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Shrey1
For the statement 1 - "Dr. Butler’s projected March, 2012 revenues from toothbrush sales amount to greater than 15% of her total revenues from March, 2011.". It is mentioned in the details that Dr. Buttler is earning 0.95*0.9 (0.845) of the revenues of the March 2011 revenue and the consultant claims that earnings from toothbrush can compensate for the loss amount i.e. 0.155. So that means that the earnings from toothbrush would be more than 15% of the March 2011 revenue.
So, the answer for statement 1 would be Yes.

Sajjad1994 can you please check this one and let me know if my understanding is incorrect here.
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­0.95*0.90=0.855 not 0.845. that means the toothbrush revenues compensated at least 14.5%, not 15%, of the March 2011 revenue. That is why Statement 1 is wrong.
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Letter 1: I am worried about our cash flow for this month. The primary 14 Jul 2026, 08:20
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Also, it says that it is the primary insurance provider, so there is a possibility that all patients are not coming via the insurance, so when factoring in the decrement of the 5% does, this number might actually be lower, right?
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Letter 1: I am worried about our cash flow for this month. The primary 15 Jul 2026, 08:54
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Hi SwiftOat,

Yes, your reading is exactly right, and it actually strengthens the case for a "No" on Statement 1.

Look closely at the wording in Letter 1: "The primary insurance provider carried by our patients is reducing what it pays per visit by 5%." The word primary tells us this cut hits only the patients covered by that one insurer - not every patient in the practice. So the 5% reduction applies to a portion of visit revenue, not all of it.

What that does to the numbers:
- The thread above computed the loss as at most 1 - (0.95 × 0.90) = 0.145, i.e. 14.5% of March 2011 revenue.
- But that 14.5% figure quietly assumes the 5% cut applies to all visit revenue.
- Since it only applies to the primary insurer's share, the real revenue loss is smaller than 14.5%.

So the amount toothbrush sales must cover to keep 2012 profit above 2011 is even less than 14.5% - and we can't pin down the exact figure at all.

Why this seals Statement 1 as No: the statement claims toothbrush revenue is greater than 15% of March 2011 revenue. But the toothbrushes only need to beat the loss, and that loss is somewhere below 14.5% - an amount we can't even measure precisely because we don't know the primary insurer's share. There's simply no way to conclude the figure crosses 15%.

Your instinct about "primary" is a great example of the MSR skill of reading qualifying words carefully - it's the same skill that makes "toward previous levels" the trap in Statement 2. Nicely spotted.

Answer: No, No, No

SwiftOat
Also, it says that it is the primary insurance provider, so there is a possibility that all patients are not coming via the insurance, so when factoring in the decrement of the 5% does, this number might actually be lower, right?
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