Essay on Purpose of Financial Measurement in Healthcare

Published: 2021-08-02 04:25:37
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Vanderbilt University
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Healthcare facilities benefit from financial measurement as it allows them to evaluate and plan on how to effectively use finances for both current operations and futuristic ones. In essence, this depends on whether the facility is making losses or profits. Financial measurement thereby allows the healthcare facility to determine how to make more profits and reduce losses (Zaman, 2017). In effect, the facility can be able to make long-term investment and financing decisions. Besides, it allows the facility to manage financial risks effectively, as well as determine whether finances are utilized optimally, efficiently, and efficiently. Ultimately, the financial measures will help determine the health facilitys growth, profitability, and growth (Delmar, McKelvie, & Wennberg, 2013).

Major Financial Measures

The major financial measures include profitability, which is the returns to investment and obtained by dividing the profits with investment cost, which can be obtained from the profit and loss account and balance sheet (Delmar et al., 2013). Secondly, there are survival measures. This is connected to how it attracts investors and makes profits, as well as the ability to pay bankers, suppliers, and also provide returns to shareholders. Growth measure is mainly involved in determining how the business is changing over time, and therefore, measures the financial changes in profitability, profits, sales and net sales among other aspects (Saleem & Rehman, 2011). It also involved with making comparisons with competitors, the economy, and the market. As such, it determines whether the company is making consistent profits losses, increasing sales, or even increasing revenues over time, for example, one to five years.

Measures Most Important For the Survival of a Healthcare Organization

These include capital gearing rations, which determine whether the healthcare institution can pay creditors and bankers in the long term, which is obtained by dividing loans and the shareholders funds. However, current ratio and the quick ratio can also determine the organizations ability to cover for short-term commitments. Current ratio is arrived at by dividing current assets by the current liabilities while the quick ratio is obtained by subtracting stocks from current assets and dividing the result by the current liabilities (Saleem & Rehman, 2011).

References

Delmar, F., McKelvie, A., & Wennberg, K. (2013). Untangling the relationships among growth, profitability, and survival in new firms. Technovation, 33(8), 276-291.

Saleem, Q., & Rehman, R. U. (2011). Impacts of liquidity ratios on profitability. Interdisciplinary Journal of Research in Business, 1(7), 95-98.

Zaman, M. (2017). The role of financial and non-financial evaluation measures in the process of management control over foreign subsidiariesempirical evidence in Slovene multinational companies. Management: Journal of Contemporary Management issues, 9(2), 53-73.

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