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Financial Statements in Healthcare Organisation

Paper Type: Free Essay Subject: Finance
Wordcount: 2652 words Published: 23rd Sep 2019

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Financial statements give you a picture of the direction your business is going and can be used as a great management tool to move towards making positive changes to the hospital when used the correct way. Hospital administrators also use financial statements to make available to stockholder, partners, and venture capitalist with a strategy business metrics. It is also used as an analytical tool to estimate the hospitals strengths and weaknesses, which can plan the hospitals future by doing more of what works best with the greatest impact to the hospital. The financial statement consist of three main components which include a balance sheet, income statement and cash flow statement used to tell you a substantial amount of facts about the hospitals core competencies and possible weaknesses are outside of the shortages in revenue, by creating and maintaining these statements they will show you which products and services will work better for the hospital.

Financial Statements in Healthcare Organisation 

Impact of Changes in financial metrics to changes in strategic plan basis scenarios- In case of the changes taking place in the payer mix, from 50% Medicare to 70%; the operating revenue is going to increase proportionally for University of Maryland Shore Regional Health. Operating income will increase, and the reduction cost would also increase and the Earnings before interest, taxes, depreciation, and amortization will rise. “Therefore”, the operating profit would increase for the periods. Assets and non-current assets, along with insubstantial part will increase (Challinor, A. J., Watson, J., Lobell, D. B., Howden, S. M., Smith, D. R., & Chhetri, N., 2014).

“With”, payer mix Medicaid patients and the changes seen for that year from 5% to 10%, will twice as likely impact the operating revenue in that period. The depreciation and EBITA would be cheaper. (Kimyagarov, G., & Shivdasani, A., 2013).

The amortization and EBITA operating profit would be not as much of (Ioannou, I., & Serafeim, G., 2014; Karim, A., & Arif-Uz-Zaman, K., 2013). “While”, earnings before taxes would rise.

“With”, the turnover rate going from 5% to 10% this will increase the cost of hiring doctors or other healthcare specialist. As cost increase, operating earnings would decrease and there would be a change in productivity seen over the year. The operating revenue and depreciation would escalate due to the high staffing turnover. (Eccles, R. G., Ioannou, I., & Serafeim, G., 2014; Greene, J., Hibbard, J. H., & Overton, V. 2014).

The effects EBITA would be noticed as the profits prior to taxes would be less; therefore, causing yearly profits to come down, non-current resources increasing with the balance sheet. (Ioannou, I., & Serafeim, G., 2014; Mintz, O., & Currim, I. S., 2014).

The cost of operating calculated would decrease on the account for reducing operating earnings and expenses. The demand for exception customer service would increase as well as spending for University Of Maryland Shore Regional Health and with the increase in competition the Net Profit Margin would decrease.

Projected Financial Statements



 Net Patient Services Revenue


 Premium Revenue


 Other Operating Revenue


Total Revenues from Operations


Operating Expenses

 Salaries and Benefits


 Medical Supplies and Drugs








 Provision for Bad Debts


 Other Operating Expenses


Total Expenses from Operations


Income Before Taxes


Income Taxes


Net Income



Income Tax





Trade Accounts Receivable




Prepaid Income Taxes


Total Current Assets




Machinery and Equipment


Less: Accumulated Depreciation


Net Property and Equipment






Current Portion of Long-Term Debt


Accounts Payable


Current Liabilities


Total Current Liabilities








The University of Maryland Shore Regional Health must have enough financial capital to carry out their roles or purposes. The University of Maryland Shore Regional Health before offering any services or starting the novice program, needs to make use of financial capital created to buy or rent space, durable medical equipment or supplies and employment or manual labor that require repayment before preforming any service to the hospital.

These prepayments are projected and will be recouped via the cash revenues which is received by using healthcare services from no operating revenues or government funding.

Money that is not recovered for repayment would be recorded on the balance sheet or the hospital financial statement relating to the hospital financial situation.

Strategic planning would include responsibility and verifying legitimacy of the financial data in the process. “In”, order for the University of Maryland Shore Regional Health to be successful requires a person with a business background that could provide changes in the viability of the hospital. (Popkova, E. G., Abramov, S. A., Ermolina, L. V., & Gandin, E. V., 2015).

Revenue growth rate is centered on the delivery of healthcare services and retention of patients. The volume of healthcare customer service and revenues will need to increase salaries and durable medical equipment. Bad debt also has to be protected. “When”, the turnover rate continues to increase due to the increase in competition in the health care field and supplying advanced services and applying proper solutions the rise in turnover would increase the budget for hiring healthcare professionals in the hospital. The increase in cost would cause operating profits to decrease, and we would see a decrease in productivity in the years to come as well as high employee turnover, the cost of operation and depreciation would increase.


In my conclusion a financial statement draws a clear picture of the hospitals economic health by properly assessing the hospital helps in the decision-making and achieving goals. The financial statement analysis considers the financial and non-financial information to include reviewing the hospitals rules, procedures and practices, and examining the auditor’s report to include a few.

These financial studies give a real understanding of the hospital’s Strengths, weaknesses, Opportunities, and threats (SWOT) “Meanwhile”, by performing along with valuation methods and in comparison other hospitals or healthcare facilities within the same business that the hospital operates.



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