Financial Statement Analysis Case study
- Stanford Medicine (Business Memorandum)
- To: Linda Hoff, the Chief Financial Officer
- From: Name, Healthcare Administration Fellow at the Prestigious Stanford Healthcare
RE: Strategic Financial Analysis Memo and Recommendations
I appreciate the opportunity to share my insights on the organization’s strategic management over the past three years. This Strategic Financial Analysis Memo will be based on the interrogation of the alignment between the financial performance and strategic direction. This is with recognizing the organization’s goal, which involves disseminating quality healthcare services and promoting overall quality of healthcare outcomes.
It would be necessary to point out that the organization’s vision involves providing predictive preventative and curative healthcare services through science and compassion with the application of the biomedical revolution. Innovation and effective transmission of knowledge obtained through the scientific method are necessary for this process, which is well represented in the organization’s mission.
Collaboration Among all the Stakeholders
The organization tends to prioritize the collaboration of all the stakeholders in the facilitation of the biomedical revolution. This strategic financial analysis will be based on the organization’s goals, which involve providing a personalized patient experience to ensure a seamless medicine experience.
This Strategic Financial Analysis Memo from the perspective of the prestigious Stanford Healthcare in the dissemination of lessons derived over the past four years. Although receivables tend to account for approximately one percent of the total assets, it would be necessary to point out that there have been inconsistencies in the account receivable for the featured three years from positive eleven percent to negative twenty-four percent, which later increases to about twenty-three percent.
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The same was realized in the investment category from 357 percent to negative sixteen and later three percent as derived through horizontal analysis. One of the post-conscious observations derived from the horizontal analysis of the financial statements involves the consistent significant differences in the assets managed by the trustees.
Stanford Healthcare may be concerned with its future as this puts the organization’s wellbeing in jeopardy. The trustees tend to provide accuracy and prudence in managing the assets that may not be in use at the present moment; however, the vertical analysis asserts that this represents a very small proportion of the total assets held by the organization throughout the featured years.
Minor assets present between one and three percent of the total assets ad it was discovered that there was a consistent decrease in the value of other assets between 2015 and 2018. The changes in the named assets can be attributed to the fact that the value of the total assets doubled through the four years from four to eight and lastly sixteen percent.
The changed in the various liabilities as significant over the past four years was rather dramatic, although the total liabilities reduced exponentially over the four years. The liability management department should be scrutinized due to the inconsistencies in the management of the accounts payable. This is more so due to the contribution in liabilities due to the organization’s subsidiaries, although the collected revenue remained consistent over the four years.
The self-insurance reserves also increased over the four years from twenty-three percent to between 2016 and 2017 and twenty percent between 2018 and 2019. This resulted in an increase in the current liabilities over the featured three years. The organization’s liquidity may be in jeopardy, limiting its ability to access creditors and investors. Liquidity is, therefore, critical in the strategic decision management of the organization, thus leading to the inability to manage long-term liability along with the shareholder’s equity.
Provisions for Doubtful Debts
The provisions for doubtful debts represent between -1% and -3% of the net service revenue collected from the patients. There is a significant change in this provision in the statement of operations ad changes from negative four percent between 2015 and 2016 to negative twenty-five percent between 2017 and 2018. The net assets released as a result of the operations decreased significantly between 2015 and 2016 and between 2017 and 2018.
The operating expenses decreased over the three years, although the operating revenue increased. This can be attributed to an increased embracement in technology and the outsourcing of some operating activities such as cleaning. It would be necessary to investigate whether there were inefficiencies in managing the operating expenses or any instances of embezzlement over the years.
One of the most dramatic fluctuations observed in the consolidated statement of operations and net assets were the transfers to the subsidiaries of the subsidiaries in the hospital, something that I would attribute to the variations in the needs.
Strategic Formulation of the Organization
In the strategic formulation of the organization, it would be necessary for the decision makers to consider the aspects of risk, especially on the management of liquidities and the operating expense. The office of the chief financial officer should not ignore any dramatic fluctuations in the respective items over the identified number of years (Mellichamp, 2019). Furthermore, the changes identified resulted from fluctuations rather than the depiction of consistent growth of the organization. Although Stanford Medicine is a nonprofit organization, growth would be necessary.
Strategic Financial Analysis Memo Reference
Mellichamp, D.A., (2019). Profitability, risk, and investment in conceptual plant design: Optimizing key financial parameters rigorously using NPV%. Computers & Chemical Engineering, 128, pp.450-467.