The amortization expense of buildings and equipment

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The amortization expense of buildings and equipment when listed on the income statement is called depreciation . For financial accounting purposes , depreciation is calculated by the straight-line method . Copyright 2016 Foundation of the American College of Healthcare Executives. Not for sale.
3 - 25 Expenses (Cont.) Most expense items listed on the income statement only approximate actual cash expenditures. The relationship is not exact because of accrual accounting. However, depreciation has no associated cash expenditure . Such an expense is referred to as a noncash expense . Interest expense reports the amount of interest paid (or obligated ) on debt financing. Copyright 2016 Foundation of the American College of Healthcare Executives. Not for sale.
3 - 26 Sunnyvale Clinic: Operating Income (in thousands) Copyright 2016 Foundation of the American College of Healthcare Executives. Not for sale. 2015 2014 Operating Revenues: Net operating revenues $169,979 $140,924 Expenses: Total Expenses $166,232 $136,594 Operating Income $3,747 $4,330
3 - 27 Operating Income Although the reporting of revenue and expenses is important, profitability is the single most important element of the income statement. For healthcare providers , the income statement often reports two profitability measures. Operating income measures economic profitability as defined by GAAP with a focus on patient service activities . It is an important measure of profitability because patient services represent the organization’s core business. Copyright 2016 Foundation of the American College of Healthcare Executives. Not for sale.
3 - 28 Sunnyvale Clinic: Nonoperating Income (in thousands) Copyright 2016 Foundation of the American College of Healthcare Executives. Not for sale. 2015 2014 Nonoperating Income Contributions $243 $198 Investment income 3,870 3,678 Total nonoperating income $4,113 $3,876
3 - 29 Nonoperating Income Nonoperating income reports income from activities not related to the provision of patient services. Contributions report donations that can be immediately spent . (Contributions that create endowments are not reported on the income statement.) Investment income lists income from (1) excess cash held as reserves or to meet known future needs and (2) endowments. Copyright 2016 Foundation of the American College of Healthcare Executives. Not for sale.
3 - 30 Sunnyvale Clinic: Net Income (in thousands) Copyright 2016 Foundation of the American College of Healthcare Executives. Not for sale. 2015 2014 Operating Income $3,747 $4,330 Total nonoperating income $4,113 $3,876 Net income $7,860 $8,206
3 - 31 Net Income The second measure of profitability, which is often referred to as the “ bottom line ,” is net income . Net income measures overall ( total ) economic profitability as defined by GAAP. In not-for-profit businesses , net income typically is called: Revenues over expenses Excess of revenues over expenses Change in net assets Copyright 2016 Foundation of the American College of Healthcare Executives. Not for sale.
3 - 32 Net Income (Cont.) In a not-for-profit corporation , the entire amount of net income is reinvested in the business.

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