Understanding the Importance of Financial Statements- Perspectives for Managers and External Stakeholders in Healthcare Organizations

Understanding the Importance of Financial Statements- Perspectives for Managers and External Stakeholders in Healthcare Organizations

Importance of Financial Statements to Managers and Outside Parties

Financial statements are used to convey a firm’s financial health and business activities and serve various groups’ needs and expectations. A set of financial statements is a powerful tool for providing vital information to managers and outside parties, such as shareholders. Notably, managers use financial statements to track a company’s economic metrics, such as performance and budgets (Szydełko & Biadacz, 2016). For instance, a cash flow statement gives a snapshot of gains, expenses, losses, and revenues essential for giving an account of how a firm’s net revenue transforms into net earnings. Managers can use such information to analyze performance and predict the firm’s future stock price direction (Szydełko & Biadacz, 2016).

Similarly, financial statements are essential to shareholders to evaluate equity (Szydełko & Biadacz, 2016). A prime example is an income statement, which contains information about a company’s revenue, debt load, expenses, and profitability. Shareholders use such information to analyze and compare a company with others and decide about their equity investments.

For-profit and Not-For-Profit Hospitals

A for-profit hospital operates with the objective of earning profits. The hospital serves its customers by offering a range of healthcare services. Owners of the hospital usually make money and may pay investors and shareholders from the earned profit (Zhu, Wang & Bart, 2014). Once formed, a for-profit hospital applies for its employer identification number with Internal Revenue Service (IRS) and uses Form 1024 to apply for tax-exempt status (Zhu, Wang & Bart, 2014). On the other hand, a not-for-profit hospital does not earn profit for its owners, with every money earned channeled back into running the organization (Ghosh, 2015). Furthermore, such an organization is not required to operate for the public good. After its formation, a not-for-profit hospital is required to apply for tax-exempt status with the IRS.

 References

Ghosh, K. (2015). Benevolent leadership in not-for-profit organizations. Leadership & Organization Development Journal, 36(5), 592-611. https://doi.org/10.1108/lodj-12-2013-01640164

Szydełko, A., & Biadacz, R. (2016). The role of financial statements in performance management. Modern Management Review. https://doi.org/10.7862/rz.2016.mmr.55

Zhu, H., Wang, P., & Bart, C. (2014). Board processes, board strategic involvement, and organizational performance in for-profit and non-profit organizations. Journal of Business Ethics, 136(2), 311-328. https://doi.org/10.1007/s10551-014-2512-1

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Discussion Forum 6: Financial Statements

Note: For all discussions, students must submit their initial post before any other students’ posts will be visible.

Understanding the Importance of Financial Statements- Perspectives for Managers and External Stakeholders in Healthcare Organizations

This week, your book discussed the importance of financial statements. For your post this week, I want you to discuss the importance of financial statements to managers, and to outside parties. Also, I would like you to explain the difference if the hospital is a for-profit, or not-for-profit organization.

Write a minimum of 250 and a maximum of 300 words.