Question

Write a 175- to 265-word response to the following:

• Why is it important for a healthcare manager to know how to prepare a financial statement? Provide an example.

Answer 1

It is important for a healthcare manager to know how to prepare a financial statement. This is because it is only by knowing how to prepare (and also how to analyze and interpret) financial statements healthcare managers will be able to determine the financial health of their services and determine if the healthcare services are being offered in a manner that is leading to creation of value. Thus by being able to prepare a financial statement healthcare managers will be able to do proper evaluation and planning, make long-term investment decisions, do financing in an appropriate manner and even manage their working capital in an apt and appropriate manner.

Example – Take the example of a hypothetical scenario. In this scenario the healthcare manager wants to determine its financial health and then plan for the future. Suppose that the healthcare manager is not able to make the income statement. In such a scenario the healthcare manager will not be able to evaluate its emergency room revenues. If the healthcare manager is able to make this financial statement then he will be able to interpret it and determine that patients are going to a competing hospital that has more space. As such this will help the healthcare manager to plan for future and he will be able to make the decision to add more space. The manager will also be able to determine his costs and profitability and plan for the future accordingly.

(241 words)