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AHIP AHM-520 Exam - Topic 6 Question 94 Discussion

The Puma health plan uses return on investment (ROI) and residual income (RI) to measure the performance of its investment centers. Two of these investment centers are identified as X and Y. Investment Center X earns $10,000,000 in operating income on controllable investments of $50,000,000, and it has total revenues of $60,000,000. Investment Center Y earns $2,000,000 in operating income on controllable investments of $8,000,000, and it has total revenues of $10,000,000. Both centers have a minimum required rate of return of 15%.One likely way in which Investment Center X or Y could effectively increase its ROI is by
B) Increasing its controllable investments
A) Focusing only on increasing its total revenues
C) Increasing total revenues, accompanied by a proportionate increase in operating income
D) Increasing expenses in order to increase operating income

AHIP AHM-520 Exam - Topic 6 Question 94 Discussion

Actual exam question for AHIP's AHM-520 exam
Question #: 94
Topic #: 6
[All AHM-520 Questions]

The Puma health plan uses return on investment (ROI) and residual income (RI) to measure the performance of its investment centers. Two of these investment centers are identified as X and Y. Investment Center X earns $10,000,000 in operating income on controllable investments of $50,000,000, and it has total revenues of $60,000,000. Investment Center Y earns $2,000,000 in operating income on controllable investments of $8,000,000, and it has total revenues of $10,000,000. Both centers have a minimum required rate of return of 15%.

One likely way in which Investment Center X or Y could effectively increase its ROI is by

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Suggested Answer: B

by Enola at Aug 07, 2024, 01:54 AM

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Lorean
10 months ago
X's income is impressive, but can it be maintained?
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Tracie
10 months ago
C seems like the best choice for sustainable growth.
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Lore
10 months ago
Wait, can increasing expenses really boost operating income?
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Alexia
10 months ago
Totally agree, focusing on revenue is key!
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Aleta
11 months ago
Investment Center X has a much higher ROI than Y.
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Lore
11 months ago
I recall a similar question where we analyzed the impact of controllable investments on ROI. I think focusing on that could be key for both centers.
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Jame
11 months ago
I'm a bit uncertain about option D. Increasing expenses to boost operating income seems risky; it might not guarantee a better ROI.
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Lino
11 months ago
I think option C makes sense because if revenues and operating income both increase, it should positively impact ROI, right?
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Clorinda
11 months ago
I remember we discussed how increasing total revenues could help improve ROI, but I'm not sure if it should be the only focus.
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Kattie
11 months ago
I'm not sure about this one. Increasing total revenues alone (option A) doesn't necessarily improve ROI, and increasing expenses (option D) would just lower ROI. I'm leaning towards option B, increasing the controllable investments, but I'm not totally confident.
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Ettie
11 months ago
Okay, I think I've got this. The question is asking about how to effectively increase ROI, so the answer has to be something that improves the ROI calculation, which is operating income divided by controllable investments. Option C seems like the best choice - increasing revenues and operating income proportionately.
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Nieves
11 months ago
Hmm, I'm a bit confused. Do we need to consider both ROI and RI, or just focus on maximizing ROI? The question mentions both metrics, but the answer choices seem to be about ROI only.
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Lindy
12 months ago
This seems like a straightforward question about maximizing ROI. I think the key is to focus on the relationship between revenues, operating income, and investments.
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Peter
12 months ago
This is a good question to test our understanding of performance optimization. I'll need to carefully consider the options and make sure I select the two most relevant reasons.
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Rose
12 months ago
I'm a bit confused on the difference between the tenant types. Is the "management tenant" responsible for managing the firewalls? That could be a possibility, but I'm not sure.
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In
1 year ago
Option D: Throw money at the problem and hope it goes away. That's the corporate way, right?
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Annelle
1 year ago
C) Increasing total revenues, accompanied by a proportionate increase in operating income
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Noel
1 year ago
B) Increasing its controllable investments
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James
1 year ago
A) Focusing only on increasing its total revenues
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Esteban
1 year ago
Ah, the age-old dilemma of ROI vs. RI. This question is like asking whether to focus on making money or saving money. I think I'll go with the one that won't land me in the poorhouse.
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Glenn
1 year ago
A) Focusing only on increasing its total revenues
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Glenn
1 year ago
C) Increasing total revenues, accompanied by a proportionate increase in operating income
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Glenn
1 year ago
B) Increasing its controllable investments
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Stevie
1 year ago
The key here is to maximize the return on the controllable investments. Option B seems like the logical choice, but I wonder if the exam is trying to trick us.
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Eric
1 year ago
I agree, increasing controllable investments would directly impact the ROI.
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Noah
1 year ago
I think option B is the best choice to maximize ROI.
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Brianne
1 year ago
C) Increasing total revenues, accompanied by a proportionate increase in operating income
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Chantell
1 year ago
B) Increasing its controllable investments
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Bronwyn
1 year ago
A) Focusing only on increasing its total revenues
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Josue
1 year ago
Increasing expenses to boost operating income? That's like trying to lose weight by eating more. Option D is a definite no-go.
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Fidelia
1 year ago
Increasing expenses to boost operating income? That's like trying to lose weight by eating more. Option D is a definite no-go.
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Lura
1 year ago
A) Focusing only on increasing its total revenues
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Lenna
1 year ago
Hmm, focusing on increasing total revenues sounds tempting, but that doesn't necessarily improve the ROI. I think option C is the way to go - increase revenues and operating income proportionately to maintain the ROI.
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Kanisha
1 year ago
I see your point, but increasing expenses to boost operating income might not be the most efficient way to increase ROI.
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Annamae
1 year ago
Increasing controllable investments could also help improve the ROI.
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Ocie
1 year ago
I think option C makes sense, it's important to maintain a balance between revenues and operating income.
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Corinne
1 year ago
I agree, increasing total revenues alone might not be the best strategy.
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Delisa
1 year ago
But wouldn't increasing total revenues, accompanied by a proportionate increase in operating income, also help improve ROI?
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Tammara
1 year ago
I agree with Christene. By increasing controllable investments, they can increase ROI.
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Christene
1 year ago
I think the answer is B) Increasing its controllable investments.
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