Reference no: EM13339599

Financial Statement Analysis

Financial statements provide an important insight into the operation of a healthcare organization. In this assignment, you will analyze the financial statements of a healthcare organization.

First read the following article, which describes how 15 measures provide an effective evaluation of the financial performance of a healthcare organization. You will use a subset of these measures, the financial strength index (FSI), in this assignment.

Cleverley, W. O., & Cleverley, J. O. (2005, July). Scorecards and dashboards: Using financial metrics to improve performance. Healthcare Financial Management, 59(7), 64-69. (AN 2009076343).

Select a nonprofit healthcare organization of interest to you. Provide an overview of the organization selected, including name and location.

Find financial data for this organization using Guidestar (https://www.guidestar.org). (The site requires free registration). All nonprofit organizations in the country are required to file Form 990 with the Internal Revenue Service (IRS). Form 990 is public information, and the Web site Guidestar is a convenient way to access 990s. Form 990 provides a great deal of organizational financial information, including income statements and balance sheets.

• On the Guidestar site, search for the selected nonprofit healthcare organization. When you find it, look for the statement: "A Form 990 is available for this organization." Locate the legal entity that is the operating organization of the facility. Some healthcare organizations have multiple legal entities, including a foundation. Select the entity that includes the patient services function.
• Open the most current 990 for the organization. It is a PDF file, and likely to be 50 to 100 pages in length. Don't worry; you will only use the first three pages. Income statement information is shown on pages 1 and 2. Balance Sheet information is shown on page 3. (You may want to review more of the 990. For example, it might include the salaries of the highest paid administrators in the organization.)

• Complete the component parts of the FSI using the formulas in the article. Use the "end of year" figures from the balance sheet. Be sure to show the calculations.
  • Total margin
  • Day's cash on hand, with debt financing percentage
  • Accumulated depreciation percentage
• Complete the FSI using the formula in the article. Show the calculations.
• Analyze the organization by comparing the FSI, and the four components of the FSI, to the indicators in the article. This will show where your selected facility falls in the range of quartiles shown in the article. Perhaps one or two of the ratios are low, and others are high. How does this impact the composite indicator, the FSI? Highlight the strengths and weaknesses of the organization based on this brief review.