Question

healthcare finance

Imagine that you are the financial manager of Clark Pediatrics

Center and you have a meeting with the board of directors in a

month. You need to create a financial analysis of the

organization. You have also been asked to compare Clark

Pediatrics to other pediatric healthcare organizations in the area

to create a trend comparison.

–

1. What must you do to complete a financial analysis?

a. What information do you need for both horizontal and vertical

analysis?

b. What sources can you use for comparison?

c. What decisions can be made regarding this information?

Answer 1

Ans:- (a) If I were the financial manager of Clarke Pediatrics center then to do a complete financial analysis I will definitely do horizontal and vertical analysis. horizontal analysis is a method which is used to analyze the financial statements which help in analyzing the past behavior or growth patterns of the company through historical data whereas the vertical analysis is also a method used to analyze financial statements through establishing a quantitative relationship. line Items present in the financial statements are expressed in percentage forms for clear understanding.

(b) To analyze horizontal and vertical analysis a true or audited financial statements of the company will be needed by the financial manager to perform the horizontal and vertical analysis.

(c) External and Internal source of information can be used for comparison and for a clear understanding of financial statements.

Internal sources are that source of information that which can be obtained within the company itself such as financial statements of previous years and current years which will help in comparison of the various factors such as Gross profit, sales, different types of assets and liabilities etc which help the management in better decision making.'

External sources are that type of information which are obtained externally such as the financial statements of other similar types of companies which will help in comparison of our own company which will determine where we exist as compared to other healthcare organizations.

(d) There are various decisions that can be made regarding this information.

1 It will tell the management of their actual financial position of the company as compared to the competitors.

2 It will help the company in better understanding of SWOT analysis i.e strength, weakness, opportunities and threat of the company in the near future.

3 It will help the company to make a better decision regarding the business and investment project if they know every strength and weakness of their company.