Health Financial Management

1213 WordsApr 29, 20125 Pages
Milwaukee Surgical Supplies, Inc., sells on terms of 3/10, net 30. Gross sales for the year are $1,200,000 and the collections department estimates that 30% of the customers pay on the tenth day and take discounts, 40% pay on the thirtieth day, and remaining 30% pay, on average, 40 day after the purchase. (Assume 369 days /year.) 1) Calculate the firm’s average collection period. Sol) Firm’s average collection period (ACP) can be calculated using the following formula: ACP = (30% * 10days) + (40% * 30days) + (30% * 40days) = (0.3 * 10days) + (0.4 * 30days) + (0.3 * 40days) = (3 + 12+ 12) = 27 days Hence the firm’s average collection period is 27 days. 2) Calculate…show more content…
1. the income statement, 2. the balance sheet and 3. the statement of cash flows). Financial statement analysis is applied both to historical data, which reflect the results of the past managerial decisions, and to forecasted data, which comprise the roadmap for the business’s future. Although financial statement analysis provides a great deal of important information regarding financial condition, but it doesn’t provide much insight into the operational causes of that condition. Hence operating indicator analysis is done, which uses operating data such as occupancy, patient mix, length of stay and productivity measures that are usually not found in business’s financial statements. Operating indicator analysis helps in identifying the factors that contributed to the assessed financial condition. Therefore the primary difference between the financial statement analysis and operating indicator analysis is that financial statement analysis focuses on the information in a business’s financial statements with the goal of assessing financial condition, whereas operating indicator analysis focuses on operating data ( not found in financial statements) with the goal of explaining financial performance. Both types of analysis are useful for health services managers, because managers can use financial statement analysis to assess current condition
Open Document