Business Proposal

B u s i n e s s P r o p o s a l | 1

Learning Team D

St. Jude’s Children’s Hospital

HCS 380

April 29, 2019

Diana Schilling

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B u s i n e s s P r o p o s a l | 2

St. Jude’s Children’s Hospital

Saint Jude’s is a non-profit children’s hospital that is focused on cancer treatment and

research, funded entirely by donations. This week, our team has taken some time to consider the

state of St. Jude’s financial statements. Some methods used for this analysis include basic

accounting tools such as horizontal analysis and ratio analysis, including the current ratio, the

dept to asset ratio, and the profit margin. In this document, the team will give their suggestions

on organizational decisions for Saint Jude’s.

Analysis

Consolidated financial statements are financial statements of a group in which the assets,

liabilities, equity, income, expenses, and cash flows of the parent company, and its subsidiaries

are presented as those of a single economic entity. While preparing a consolidated financial

statement, there are two basic procedures that need to be followed. The first one is to cancel out

all the items that are accounted as an asset in one company and liability in another. The second is

to add together all uncancelled items. The two main items that cancel each other out from the

consolidated statements of financial position are first, the investment in subsidiary companies,

which is treated as an asset in the parent company will be cancelled out by “share capital”

account in subsidiary statement. Only parent company’s “share capital” account will be included

in the consolidated statement. Second, if trading between different companies in one group

happens, then the payables of one company will be cancelled out by the receivables of another.

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Financial Statement

After examining St. Jude’s financial statement, we have discovered that in 2017 they

made a change in assets that gave them a profit of $702,000, where as in 2016 their change in

assets were only $202,673. Upon further investigation, the reason that St. Jude has had such a

change in net assets between 2016 and 2017 is because of the change in their Revenues. For

instance, their Insurance Recoveries made them a profit of $9,628 in the Fiscal year 2017. They

also had research grants in the total $89,431 dollars for the fiscal year 2017, where as they only

had $88,797 for the fiscal year 2016.

In 2017 St. Jude’s total expenses also increased by $98,049. Out of all their expenses,

their biggest funding increase went to their Patient Care Services. St. Jude spent $427,945 on

Patient Care, where as in 2016 they only spent $389,040 dollars which means they had an

increase of $38,905 over the fiscal financial year between 2016 and 2017. If St. Jude’s could find

a way to lower their Expenses in the following years to come, they could potentially turn a

bigger profit in future years.

Recommendations

According to Nonprofit World (2008) “Reduce paper weight whenever possible when

printing and mailing. Paper can cost up to 30% of your printing job, so using inexpensive paper

is a good way to stretch your budget. Using lower-weight paper will also reduce your postage

costs.” (19). For future purposes St. Jude’s hospital could use methods to lower their expenses,

such as, cutting costs for unnecessary supplies. If they used paper billing, they could switch to

electronic billing to cut paper supplies costs down. They could also reduce costs by not using

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B u s i n e s s P r o p o s a l | 4

unnecessary items when treating a patient. These could help the company turn a bigger profit and

help more people as a nonprofit organization.

Profit Margin

St. Jude Hospital receives majority of its revenue from donations raised by American

Lebanese Syrian Associated Charities (ALSAC). This organization was founded in 1957 with the

main purpose to help raise funding that is needed to support and maintain the operation of St.

Jude. Of all the donations that are raised by ALSAC, 75 percent of them goes to the hospital. The

other 25 percent of these donations goes to the functional fundraising expenses, which includes

salaries, wages, benefits, mailing, company expenses, and travel. It costs St. Jude one billion

dollars a year to operate the hospital and keep a reserve funding in case there is a shortage of

donations. For every dollar donated to St. Jude, 0.82 cent of that goes to support patient care, and

research.

The operation of financial reports for St. Jude’s is overseen by the board of directors, and

governors all of St. Jude. ALSAC financial reports are completed and prepared according to the

accounting principles (GAPP) and are audited annually by a public accountant. After that, they

are publicly displayed as required by state, and federal regulations. The gross margin is

calculated as gross profit divided by revenue. St. Jude is considered a non- profit organization. In

order to get the profit margin for 2016, and 2017 you must figure the organization’s expenses and

loss from the company’s revenue. You will then get the profit, which is also called the net asset.

On St. Jude’s annual report, their net profit asset for 2016 was $3,957,917. For 2017, their net

profit asset $4,659,917.

Financial Performance

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After going over the combined financial statement for St. Jude’s Research Hospital for

the fiscal years ended June 30, 2017 and 2016, we concluded that St. Jude’s total assets increased

by $512, 072, 180. These assets came in a variety of ways that include cash and cash equivalents,

to contributions and investments, property, and other assets. As the total increases from the

different assets, the more St. Jude was able to provide for the restricted and unrestricted

investments. There was also a significant decrease in assets limited as to use, which means there

was no specific purpose for these funds. These funds were probably used elsewhere for

equipment or patient care needs. Because of the increase in total assets, liabilities changed. For

example, St. Jude’s debt in 2016 was $211, 247, 710, therefore, the total liabilities were higher.

After this debt was no longer on record for 2017, total liabilities went down by almost $190

million. St. Jude’s is a non-profit organization, so their net assets are divided into unrestricted

and restricted assets. In this case, St. Jude’s has temporarily and permanently restricted net

assets. In conclusion, the amount of net assets for St. Jude’s in 2017 will match exactly with the

stockholder’s equity.

Conclusion

Saint Jude’s children’s hospital and research center is publicly owned, meaning that all

their research and treatment funding must come from donations and grants, rather than stock, and

according to the numbers, the money does indeed come. Analysis of the financial statements has

shown that Saint Jude’s does everything they can do to lower costs, including using lower

weighted paper, while providing quality care to all of those who need it at no cost.

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References

Nonprofit World(2008). Retrieved from http://www.valleynonprofitresources.org/pdfs/vnr-

costcutting-article.pdf

ST. JUDE CHILDREN’S RESEARCH HOSPITAL, INC. AMERICAN LEBANESE

SYRIAN ASSOCIATED CHARITIES, INC. (2016 & 2017). Retrieved from

https://www.stjude.org/content/dam/en_US/shared/www/about-st-jude/financial-

information/fy17-combined-audited-financial-statements.pdf

Wolfe, Michael. (n.d.). A Good Profit Margin for a Nonprofit Organization. Small Business -

Chron.com. Retrieved from http://smallbusiness.chron.com/good-profit-margin-

nonprofit-organization-18320.html

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