Question

Describe the various financial statements that might be used in a medical facility to determine how business is going. What factors might a manager look at?

Answer 1

The financial statements used in a medical facility to determine how business is going -

Income Expenditure Statement or Income and Expenditure Account - To record all the sales of medicines, patient service revenue, hospital and other charges & expense like rent of the hospital, salaries to doctors and other staff etc.

Cash Book or Cash Account - To record all the cash receipts and expenses to track all the cash transactions.

Balance Sheet - To know the position of current assets like cash, service revenue receivable from patients, inventory of medicines etc. and long-term assets like hospital buildings, hospital equipment etc. and also for liabilities that includes current liabilities like accounts payable where medicines purchased on account from suppliers, short-term loans payable withing one year etc. and long-term liabilities like loans payable more than one year etc.

By using these financial statements, the managers can determine how the medical business is going.

Managers might look at -

How the cash transactions are going as here there are many possibilities for committing fraud.

Managers might look at the balance sheet to know about the working capital by comparing both current assets and current liabilities etc. Also, they can look at the long-term assets and long-term liabilities whether such assets are correctly valued and presented in the balance sheet, at what intervals, the long term loans are getting paid etc.

Managers might also look at the daily operating activities from the income statement to know how the business is generating the revenue etc.