Financial Statements Assignment

Financial Statement

Mardany Escobedo

February 10, 2020

HCS 380: Healthcare Accounting

Professor Lloyd Ford

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Financial Statements

The necessity in the healthcare industry for financial statements is of the greatest

importance. The use of multiple varieties of financial statements allows an organization to be

able to organize and properly manage their spending and finances. The need for financial

statements is crucial in securing a well secured and accounted for healthcare organization. A

financial statement is a business record that allows one to be able to track and monitor the

performance of the certain organization. There are a multitude of components that are used

including: balance sheet, income statement, cash flow statement. These all together allow

industries and private organizations to monitor financial growth and keep track of important

expenses. A balance sheet is a tool used by organizations to identify how assets are funded, and

have the assets listed on the sheet in order of liquidity. An income statement covers a broader and

longer time period of finance; it provides an overview of expenses, revenues, net income and

earnings per share. Finally, a cash flow statement or (CFS) measures how well a company

generates cash to pay its debt obligations, fund its operating expenses, and fund investments. All

industries use financial statements to be able to keep track of the pay and expenses that they may

face financially, and health care is just one of the main industries that does so.

Financial Statements in Healthcare Organizations

A balance sheet is a useful tool that allows a company or in this instance a healthcare

organization, to be able to see how assets are funded and how earnings are being brought in. This

allows a company or healthcare center to be able to keep track of all the benefits their

organization is creating. The growth that can be documented and displayed will allow the owner

of the company to be able to set goals and make future financial decisions for the organization.

Balance sheets are a very important and impactful tool that can be utilized to help out the

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healthcare organization. The balance sheet also helps with arranging the assets in order of

liquidity which is also a very important factor that comes into play, and with simply using

balancing sheets it can allow any healthcare organization to quickly and reliably make decisions

regarding future assets.

Income statements allow the monitoring of the previous and current and allow the

speculation of future financial assets. In the healthcare field there is a need for these types of

tools and sources that can allow actuarial personnel and others to be able to maintain and monitor

the progress that is coming from the organization. If there are sufficient funds to be able to

expand the organization, actions will be done to fully create the best and most efficient type of

healthcare that is able to be provided. With the income statements constant growth and expansion

can be seen and taken into account, and further influence future decisions. This tool is great for

managing and delegation of great quality and efficient services.

The cash flow statement (CFS) manages the institution’s important and upcoming

payments, operation expenses, and debt. This portion of the organization is very necessary to

maintain a balanced money flow throughout the entire organization at all times. They determine

the right budget and how to save for what needs to be paid. The balance sheet and income

statements complement the cash flow statement. This combination of work ethics really

combines to produce the superior healthcare organization.

The main purpose of having a financial program put into place is to allow the healthcare

organization to create a system that enables them to set and meet their financial goals and also

allows the organization to achieve better patient satisfaction by being able to not only properly

provide the needs of the patient, but to do so proficiently. Financial management benefits

healthcare organizations structure their very important loads of financial information, keeping

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everything smooth and orderly. Specifically, constantly evaluating the current stage in which the

healthcare organization is undergoing and planning for the future to improve or alter any areas

that may need some attention. Healthcare organizations can be compared to a grade school class,

or the government, where in situations of assistance, they come together as a team, brainstorm,

and resolve the problem. The organization will have to make countless amounts of long-term

investment decisions that immensely affect them, for the better or worse. Working capital

management is probably the most ergonomic and cost-effecting components to financial

management. Working capital movement determines the finances, receivables, inventories,

marketable securities, and how to save money. In detail, managing capital ensures they are never

overspending and are cautious with their decisions. It is crucial that they reduce the price,

including time, money, resources, and labor, to ensure their organization is processing and

working towards a win-win-situation for patients and the team.

Conclusion

Financial statements are critical when it comes to healthcare allowing organizations to

track utilization management. They help and provide essential support to organizations with very

heavy information that needs to be stored neatly and organizes all finances that ultimately

improve the workflow, money flow, and positive customer care/ feedback. For instance, tracking

a patient's amount of visits to an ER can be used on “frequent flyers” for patients who show large

amounts of utilization. With this they will have knowledge that patients are coming into the ER

almost aimlessly, wasting everyone’s time and money. A solution to this conflict is to incorporate

additional training for current or new staff/resources, and educate or provide services for patients

when in need of medical attention, ER being last resort. They could certainly call PCP during

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office hours or the on call line, visit urgent care, and more, ER doesn’t have to be the go to solve

their problems.

Health care is also a business entity and needs to keep track of financial flow/cash flow in

order to have a so-called “good economy” but in relations of a healthcare organization, this is

why financial statements are very imperative, especially in healthcare. Financial statements

allow for healthcare organizations to run accordingly, with easier and advanced ways of being

more organized. Overall creating a more coordinated system that easily manages the spending,

income, payments, and other essential components necessary to keep crucial information

tabulated. Financial statements are detrimental for having a top notch institution that maintains

themselves and guides people in need.

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References

Dong, G. N. (2015, Februrary). Performing well in financial management and quality of

care: evidence from hospital process measures for treatment of cardiovascular disease. BMC

HEALTH SERVICES RESEARCH, 15 (45). doi:https://dx.doi.org/10.1186%2Fs12913-015-0690-

x

Kearney, A. (n.d.). Financial Management in Healthcare Organizations: Roles &

Functions. Retrieved from https://study.com/academy/lesson/financial-management-in-

healthcare-organizations-roles-functions.html

Kimmel, P. D., Weygandt, J. J., & Kieso, D. E. (2016). Accounting: Tools for Business

Decision Making (6th ed.). Retrieved from The University of Phoenix eBook Collection

database.

Murphy, C. B. (2019). Financial Statements. Retrieved from

https://www.investopedia.com/terms/f/financial-statements.asp

Understanding the Importance of Financial Statements (2017). Retrieved from

https://www.bookkeepingbybakersmith.com/understanding-the-importance-of-financial-

statements/

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