Strategic Financial Analysis Assignment Project
Order ID 53563633773 Type Essay Writer Level Masters Style APA Sources/References 4 Perfect Number of Pages to Order 5-10 Pages Description/Paper Instructions
Week 5
Service Line Costing and Pricing
WELCOME
Welcome to Week 5! This is an important week for grading, so be sure you submit all the work that has been due up until this point.
Let’s continue learning about service line costing and pricing.
TO-DO LIST
0%ARN
Readings
From Healthcare Finance: An Introduction to Accounting and Financial Management:
- Chapter 7, “Service Line Costing and Pricing.”
Power of Providers to Set Prices
Click the linked activity title to access this weekly discussion. If you need help with completing discussions, please watch this video for more information.
STRATEGIC FINANCIAL ANALYSIS
Strategic Financial Analysis
Instructions
Read the following scenario, then draft a 3–4 page business memorandum to Linda Hoff, Stanford’s CFO. In your memo, codify your findings and interpretations from the horizontal and vertical analyses and the level of alignment in the company’s fiscal management and its strategic direction. Include an Excel spreadsheet as an attachment to the memo. In this memo you will:
- Review the year-over-year variances contained in the audited Stanford balance sheets and income statements for fiscal years 2015–18 in the Week 5 Assignment Spreadsheet [XLSX]. You’ll be expected to pay particular attention to the negative variances (color coded in red) that you believe to be potentially the most impactful to Stanford.
- Speculate as to the reasons for the negative variances.
- Examine the common size balance sheets and income statements looking for abnormally low or high ratios based on what you know about the line item and what you observe in the data for the other fiscal years.
- Look for patterns in the line items over the three-year period and identify any unusual findings that may need to be examined further.
- Assess the alignment of the organization’s fiscal management to the strategic direction of the firm. Fiscal management is based on your horizontal and vertical analyses. The strategic direction is based on the vision, mission, and strategic priorities of Stanford.
Purpose
The purpose of this assignment is to familiarize you with financial statements, the need to align the financials and the strategic direction of the firm, and the process of performing horizontal and vertical analyses of a company’s balance sheets and income statements.
Scenario
You’re a health care administration fellow at the prestigious Stanford Healthcare. You have been rotating through the various departments over the past nine months and now you have the honor of working under the mentorship of Chief Financial Officer Linda Hoff.
Stanford Medicine includes Stanford Healthcare, Stanford Children’s Hospital, and Lucile Packard Children’s Hospital Stanford. This organization uses an integrated approach to strategic planning, which incorporates jointly agreed upon strategic priorities from its various entities. It also ensures a high degree of congruence in strategic focus by each entity. Before outlining the strategic priorities for Stanford Medicine, it is important to note that a firm’s directional strategy comprises three discrete yet interwoven components: vision, mission, and goals (or, in this case, priorities).
Armed with this knowledge, you have familiarized yourself with the vision, mission, and priorities of Stanford Medicine. Below is what you found. When examining a company’s financials, it is prudent to keep the directional strategy of the company in mind. After all, in order to advance many strategic priorities, which include fulfilling the mission and positioning the organization to achieve its vision for the future, proper management of the firm’s scarce resources is vital. Failure to properly manage the financial performance of the organization can compromise the company’s ability to maintain a competitive advantage in the marketplace.
Our Vision
Precision Health: Predict. Prevent. Cure. Precisely.
We will heal humanity through science and compassion by leading the biomedical revolution in precision health.
Our Mission
Improving Human Health Through Discovery and Care.
Through innovative discovery and the translation of new knowledge, Stanford Medicine improves human health locally and globally. We serve our community by providing outstanding and compassionate care. We inspire and prepare the future leaders of science and medicine.
Strategic Priorities
A collaborative endeavor involving the entire community, the Stanford Medicine integrated strategic planning process yielded a framework that is human centered and discovery led, focused on three overarching priorities for our enterprise.
By enhancing our strengths and achieving our goals in these priority areas, we will amplify our preeminence and remain uniquely positioned to lead the biomedical revolution in precision health, ensuring our continued ability to guide health care through significant global changes.
Value Focused
- Provide a highly personalized patient experience.
- Ensure a seamless Stanford Medicine experience.
Digitally Driven
- Amplify the impact of Stanford innovation globally.
- Deliver human-centered, high-tech, high-touch care and revolutionize biomedical discovery.
- Lead in population health and data science.
Uniquely Stanford
- Accelerate discovery in and knowledge of human biology.
- Discovered here, used everywhere: advance fundamental human knowledge, translational medicine, and global health.
- Ensure preeminence across all of our mission areas.
Variance Analyses
Normally, managers are expected to examine positive and negative variances, and then speculate as to possible explanations for the observed variances. Following this initial assessment, managers would be expected to dig deeper into those variances of greatest concern to the organization to uncover the actual causes for the variances, and then implement necessary corrective actions. Digging into all variances would be costly and, quite frankly, a misuse of time and energy.
The CFO has asked you to conduct a variance analysis of the company’s consolidated balance sheets and income statements for fiscal years 2015, 2016, 2017, and 2018, which you began. You have determined the variances for each account (line item) captured in the financials. Now that this first step has been accomplished, the CFO would like you to pay particular attention to the negative variances contained in the spreadsheet and focus on those variances you believe to be potentially the most impactful to Stanford.
Once you’ve completed your variance analysis over time, which is referred to as a horizontal analysis, you are ready to create a common size balance sheet and income statement of each of the four fiscal years (2015–18). You prepared the common sized financials, which are captured in your spreadsheet. Now it is time to perform vertical and horizontal analyses of these common size financials.
The common size balance sheet allows you to see each asset relative to total assets as well as each liability and net asset (in the case of nonprofit organizations) relative to total liabilities and net assets. In a common size income statement, each line item is expressed as a percentage of total revenue or sales. Common sizing balance sheets and income statements allows firms to compare against one another even though they may be of different sizes.
It also allows a firm to benchmark its financial performance against comparative groups. In this case, there isn’t any comparative data to benchmark against; however, you can examine the ratios in each fiscal year and look to see if anything looks abnormally low or high based on what you know about the line item and what you observe in the data for the other fiscal years (vertical analysis). You can also look for patterns in the line items over the four fiscal years and point out any unusual findings that may need to be examined further (horizontal analysis). In finance, sometimes the organization establishes interim goals and targets for certain line items in the financials. The firm can compare its actual performance against the established goals and targets.
Financial Management and Strategic Direction
Once you’ve completed your horizontal and vertical analyses of the financial statements, you should be able to get a sense of how well management has managed the financial resources of the company in support of its strategic direction. In business, the strategic direction should be evident in its vision and mission statements and strategic priorities. The strategic priorities should support the company’s mission, and the mission should help advance the firm’s vision for the future. Failure to effectively manage the company’s financial resources can seriously compromise the firm’s ability to fulfill its mission and subsequently the vision.
Business Memorandum to CFO
Using the analysis that you performed on Stanford Healthcare and trends that you identified, write a business memorandum to the CFO. In your memo, codify your findings and interpretations, and assess the alignment of the organization’s fiscal management to the firm’s strategic direction. Attach to the memo your analysis in an Excel spreadsheet. Your analysis and trends identified should take into account any feedback that you received from your professor and/or peers.
Helpful hints: Negative variance is not always a bad thing. For example, you might see a slight increase in the operating costs; however, if you achieved a positive variance in the total operating revenue that outpaced the increase in operating costs, that may be perceived as a positive outcome. Remember, you need to spend money to make money. We just want to make certain that operating expenses don’t outpace the growth in operating revenues. Also, keep in mind that some variances are useful in explaining other variances even if these variances are associated with different financial statements. For example, you may see an increase in operating costs, which is a negative variance, but an increase in current assets, which is a positive variance.
Furthermore, you should look for patterns over time. This can reveal both positive and negative trends that may provide insight into the variances you discovered. For example, you may have noticed that a certain expense has continued growth over the past 3 years (negative variance); however, the rate of growth year-over-year has been declining. It could be that Stanford has implemented some cost-cutting measures that are showing signs of working.
This course requires the use of Strayer Writing Standards. For assistance and information, please refer to the Strayer Writing Standards link in the left-hand menu of your course. Check with your professor for any additional instructions.
RUBRIC
QUALITY OF RESPONSE NO RESPONSE POOR / UNSATISFACTORY SATISFACTORY GOOD EXCELLENT Content (worth a maximum of 50% of the total points) Zero points: Student failed to submit the final paper. 20 points out of 50: The essay illustrates poor understanding of the relevant material by failing to address or incorrectly addressing the relevant content; failing to identify or inaccurately explaining/defining key concepts/ideas; ignoring or incorrectly explaining key points/claims and the reasoning behind them; and/or incorrectly or inappropriately using terminology; and elements of the response are lacking. 30 points out of 50: The essay illustrates a rudimentary understanding of the relevant material by mentioning but not full explaining the relevant content; identifying some of the key concepts/ideas though failing to fully or accurately explain many of them; using terminology, though sometimes inaccurately or inappropriately; and/or incorporating some key claims/points but failing to explain the reasoning behind them or doing so inaccurately. Elements of the required response may also be lacking. 40 points out of 50: The essay illustrates solid understanding of the relevant material by correctly addressing most of the relevant content; identifying and explaining most of the key concepts/ideas; using correct terminology; explaining the reasoning behind most of the key points/claims; and/or where necessary or useful, substantiating some points with accurate examples. The answer is complete. 50 points: The essay illustrates exemplary understanding of the relevant material by thoroughly and correctly addressing the relevant content; identifying and explaining all of the key concepts/ideas; using correct terminology explaining the reasoning behind key points/claims and substantiating, as necessary/useful, points with several accurate and illuminating examples. No aspects of the required answer are missing. Use of Sources (worth a maximum of 20% of the total points). Zero points: Student failed to include citations and/or references. Or the student failed to submit a final paper. 5 out 20 points: Sources are seldom cited to support statements and/or format of citations are not recognizable as APA 6th Edition format. There are major errors in the formation of the references and citations. And/or there is a major reliance on highly questionable. The Student fails to provide an adequate synthesis of research collected for the paper. 10 out 20 points: References to scholarly sources are occasionally given; many statements seem unsubstantiated. Frequent errors in APA 6th Edition format, leaving the reader confused about the source of the information. There are significant errors of the formation in the references and citations. And/or there is a significant use of highly questionable sources. 15 out 20 points: Credible Scholarly sources are used effectively support claims and are, for the most part, clear and fairly represented. APA 6th Edition is used with only a few minor errors. There are minor errors in reference and/or citations. And/or there is some use of questionable sources. 20 points: Credible scholarly sources are used to give compelling evidence to support claims and are clearly and fairly represented. APA 6th Edition format is used accurately and consistently. The student uses above the maximum required references in the development of the assignment. Grammar (worth maximum of 20% of total points) Zero points: Student failed to submit the final paper. 5 points out of 20: The paper does not communicate ideas/points clearly due to inappropriate use of terminology and vague language; thoughts and sentences are disjointed or incomprehensible; organization lacking; and/or numerous grammatical, spelling/punctuation errors 10 points out 20: The paper is often unclear and difficult to follow due to some inappropriate terminology and/or vague language; ideas may be fragmented, wandering and/or repetitive; poor organization; and/or some grammatical, spelling, punctuation errors 15 points out of 20: The paper is mostly clear as a result of appropriate use of terminology and minimal vagueness; no tangents and no repetition; fairly good organization; almost perfect grammar, spelling, punctuation, and word usage. 20 points: The paper is clear, concise, and a pleasure to read as a result of appropriate and precise use of terminology; total coherence of thoughts and presentation and logical organization; and the essay is error free. Structure of the Paper (worth 10% of total points) Zero points: Student failed to submit the final paper. 3 points out of 10: Student needs to develop better formatting skills. The paper omits significant structural elements required for and APA 6th edition paper. Formatting of the paper has major flaws. The paper does not conform to APA 6th edition requirements whatsoever. 5 points out of 10: Appearance of final paper demonstrates the student’s limited ability to format the paper. There are significant errors in formatting and/or the total omission of major components of an APA 6th edition paper. They can include the omission of the cover page, abstract, and page numbers. Additionally the page has major formatting issues with spacing or paragraph formation. Font size might not conform to size requirements. The student also significantly writes too large or too short of and paper 7 points out of 10: Research paper presents an above-average use of formatting skills. The paper has slight errors within the paper. This can include small errors or omissions with the cover page, abstract, page number, and headers. There could be also slight formatting issues with the document spacing or the font Additionally the paper might slightly exceed or undershoot the specific number of required written pages for the assignment. 10 points: Student provides a high-caliber, formatted paper. This includes an APA 6th edition cover page, abstract, page number, headers and is double spaced in 12’ Times Roman Font. Additionally, the paper conforms to the specific number of required written pages and neither goes over or under the specified length of the paper. GET THIS PROJECT NOW BY CLICKING ON THIS LINK TO PLACE THE ORDER
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