Exam I Formula Sheet

Exam I Formula Sheet - Role of finance Plan for, acquire,...

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Role of finance – Plan for, acquire, utilize & control resources to maximize the efficiency and value of the org. | Gen. Hospital Ownership: non-prof (>50%) > inv-owned > state gov > fed gov Accounting entity – established boundaries that tell accountants what data must be included as well as inform readers what business is being reported Going concern – most assets should be valued on the basis of their value to the ongoing business as opposed to their current market (liquidation) value Organizational Goals Financing Taxation/ Tax-Exempt Non-profit Sustainability; Maximization of quantity & quality of services Tax-exempt debt; donations/ grants; earnings Charity; tax-exempt debt; income and prop tax- exempt Investor- Owned Max. shareholder wealth (locate where ppl have insur) Taxable debt; new equity (sell stock); earnings Corp. income tax ~40%; prop. tax; int/ dep exp- tax shields Fee-for-service - payment is tied to the amount of services provided; Capitation - payment is tied to the size of the covered population; usu. per member per month basis Financial Acctg Conceptual Framework – Characteristics of Fin. Data: Relevant (predictive value, timely); Reliable (independently verifiable); Comparable (across org’s); Consistent (over time) Accrual Acctg Rev Recognition: rev’s recognized in the acctg period in which they’re earned | Matching: expenses matched to revenues to which they relate “The financial acctg conceptual framework requires that expenses be matched with the revenues to which they relate. This practice is implemented through the use of accrual acctg. Although the org. spent $250,000 in cash on supplies during 2006, only $198,000 in supplies were actually used in patient care; therefore, $198,000 is reported as supplies expense in the income statement.” < INCOME STMT > (Stmt of: Operations; Activ’s; Rev’s and Exp’s): major estimates on income stmt/ greatest uncertainty: Contractual Allowances; Bad Debt Exp; Dep Exp Charges – D&A – Charity = Net patient services revenue – Bad Debt Exp = Net Income from Patient Services Dep Exp as Tax Shield: (for-profit) [Rev – Op Exp’s – Dep Exp] = Income b4 tax – taxes = Net Income | A higher dep exp results in less taxes paid (shield) | Dep Exp= (Cost – Salvg Val)/ Use. Life Bad Debts Exp - amt of net patient svc rev not expected to be collected, recorded on Income stmt; Inc Bad Debt Exp (debit), Inc Allow for Doubtful Accts (credit-CA) Estimate Cash Flow = NI + Noncash exp’s | Dep exp is a noncash exp. For non-profit firms, changes in dep exp will have no effect on estimated cash flow If dep. exp increases (when estimating CF)- net income will decrease, CF increases bc of tax shield from dep exp | Supplies Exp - only consumed supplies are expensed on income stmt <Balance Sheet> Marketable securities (MS) - short-term investments in highly liquid, typically low-risk, securities | Net patient A/R- net of charity
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Exam I Formula Sheet - Role of finance Plan for, acquire,...

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