Financial Data

9781284118308_SLID_CH15.ppt

Chapter 15: Using Comparative Data

Using Comparative Data

Managers use comparative data to set common ground for planning, control, and decision-making purposes.

Comparability Criteria

True comparability needs to meet three criteria:

Consistency

Three elements of consistency are all equally important:

Verification

You should ask three questions about verification:

Can the data be verified?
Are the data reasonable?
If an objective, qualified person reviewed the data, would he or she arrive at the same conclusion and/or results?

Monetary Unit Measurement

You should ask this question: Is all the information being prepared or under review measured by the same monetary unit?
In the United States, we would expect all data to be in dollars, but properly consistent currency conversions are important when reporting global operations.

Uses of Comparative Data

Four common uses of comparative data include:

Figure 15-1 A Comparison of Hospital One's Budgeted and Actual Expenses.

Figure 15-2 A Comparison of Hospital One’s Expenses Over Time.

Figure 15-3 A Comparison of Three 100-Bed Hospitals' Long-Term Debt

Figure 15-4 A Comparison of Three Hospitals' Total Expenses.

Figure 15-5 A Comparison of Three Hospitals' Expenses per Bed.

Figure 15-6 A Comparison of Hospital One's GS Inpatient Expenses with Industry Standards.

Making Data Comparable:
Annualizing Partial-Year Expenses

Annualizing partial-year expenses is important to know because comparability requires such consistency.
Table 15-2 (p. 158) sets out actual 10-month expenses that are annualized to 12 months.

(Details about how to compute annualizing are in the chapter text.)

Making Data Comparable:
Inflation Factors

“Inflation” is defined as “an increase in the volume of money and credit relative to available goods and services resulting in a continuing rise in the general price level” (Merriam Webster’s Collegiate Dictionary, 10th ed., s.v. “Inflation”)
An inflation factor is used to compute the effect of inflation over time. (An example follows on the next two slides.)

Making Data Comparable:
Currency Measures

Currencies are typically converted for financial reporting purposes using the

(Chapter 15 explains how to convert currency using the exchange rates. Foreign currency examples follow on the next slide.)

Making Data Comparable:
Standardized Measures

Finally, standardized measures aid comparability and especially assist in performance measurement.
Electronic medical records: The wave of the future in health care–depend upon such standardized input.

Cumulative Inflation Factor for Comparable Data-Assignment
Exercise 15-3: Solution

Projected Revenue (in millions)
Year 1	Year 2	Year 3	Year 4	Year 5
Hosp. 1	$20	$22.50	$27.50	$27.50	$30
Hosp. 2	$20	$22.05	$27.55	$27.75	$31.6