Financial management for hospital executives2

1,057 views
954 views

Published on

Published in: Economy & Finance, Business
0 Comments
0 Likes
Statistics
Notes
  • Be the first to comment

  • Be the first to like this

No Downloads
Views
Total views
1,057
On SlideShare
0
From Embeds
0
Number of Embeds
1
Actions
Shares
0
Downloads
56
Comments
0
Likes
0
Embeds 0
No embeds

No notes for slide

Financial management for hospital executives2

  1. 1. ES S EN TI A L S I N F I N A N CI A L M A N A GEM EN TExecutive Course H OS PI TA L F OR in Hospital Administration EXECU TI VES Organized by the College of Public Health University of the Philippines Presented by: Manuel Eduardo B. Lunas
  2. 2. I. Introduction to Financial Management a. Overview b. Looking at a Corporation’s Finances c. Analysis of Financial StatusII. Fundamental Concepts a. Risks and Rates of Return b. Time ValueVIII. Financial Assets a. Bonds b. Stocks c. Accounts ReceivableXII. Capital Budgeting : Investing in Long-Term Assets a. Cost of Capital b. Basics of Capital BudgetingXV. Capital Structure / Dividend Policy a. Equity vs Leverage b. Dividend Declarationvi. Working Capital a. Managing Current Assets b. Financing Current Asstsvii. Financial Planning and Forecasting
  3. 3. simply is the science of the handling of moneyFinancial Management -involves the planning, directing, monitoring, organizing and controlling of the monetary resources of an organization
  4. 4.  Survive Avoid Distress and Bankruptcy Beat the Competition Maximize Sales or Market Share Minimize Costs Increase Profits Maintain Steady Earnings Growth Classifiable into Two Groups •Profitability •Risk Control
  5. 5. Type of Organization Private Company Private / Government Profit Oriented Non Profit Objective Profit Service Provision Financial Viability Financial Viability (?) Shareholders Satisfaction Stakeholders Investors / Shareholders General Public Defined Sector Borrowings SubsidiesOther Sources •Loans •Loans •Bond float •Grants •Leasing •Industrial partnership •Public offering Joint venture agreements common for bothOrganizational Structure Traditional Bureaucratic By service lines or major grouping Responsibility centers •(Cardio Vascular- Section (Profit or cost center) •Radiology Department- •Diagnostics Center
  6. 6. Financial Management is Centered on astrategic visionDefined as: -w h a t w e w a n t t o h ap p e n -w h c etn w r i on e e d t o -a s a a e -a es e t o f t a r g e t s b -b a s i c a lly a m o d e l The essence of financial management focuses on the transformation of the current situation to a desired paradigm shift
  7. 7. Planning establishing goals and developing strategies for these goals --Budget preparation is the major activity in this elementControlling involves assuring that the established plans or strategies are being followed -- monitoring of operation results vs targetOrganizing and Directing relates to using resources to the best advantage. Resources: In this case may also apply to staff, space, supply and equipmentDecision Making the analysis and evaluation of critical issues to select the best alternatives for action
  8. 8. B a la n c e S h e e tR e v e n u e & E xp e n se S ta te m e n tC h a n g e s i n F u n d B a la n c e /N e t
  9. 9. is the declaration of the organizational assets andBalance Sheet liabilitiesRevenue and Expense Statement -covers a time period (i.e. a year and shows the summary of revenues generated vs. expenses incurredChanges in Fund Balance/Net Worth -reflects whether an organizations is moving in a positive direction via its value appreciation or in a negative way through its decline in value -this translates a variety of accounting elementsCash Flows where cash has yet to be received along with depreciation of appropriate assets and converts them in a cash flow for a designated period.Note: The first two are often considered the most critical in determining an entity’s over-allwell being. As a normal operating expectation, revenue must exceed expenses to attainfinancial viability
  10. 10. Riskand Rate of ReturnTime Value of MoneyParameters
  11. 11. Type of Organization Private Company Private / Government Profit Oriented Non Profit Objective Profit Service Provision Financial Viability Financial Viability (?) Shareholders Satisfaction Stakeholders Investors / Shareholders General Public Defined Sector Borrowings Joint Venture AgreementOther Sources •Loans •Loans •Bond float •Grants •Leasing •Industrial partnership •Public offering Joint venture agreements common for bothOrganizational Structure Traditional Bureaucratic By service lines or major grouping Responsibility centers •(Cardio Vascular-Radiology (Profit or cost center) Department- Diagnostics Center) •Subsidiary section
  12. 12. -t h e p r o c e s s b y w h i c h c a p i ta l e x p e n d i tu re s a re d e c i d e d u s i n g va ri o u s c r i t e r i a fo r p r o je c t s e le c t i o nTools for Capital Budgeting • N e t P r e s e n t V a lu e • I n te rn a l R a te o f R e tu rn • P r o fi t a b i li t y I n d e x • P a y b a c k P e ri o d • R e t u r n o n B o o k V a lu e
  13. 13. A capital expenditure normally requires a huge cash outlay for a project that is supposed to produce a cash inflow over a period of time exceeding one year. E.g. acquisition of a new CT-Scan machine, setting up a Medical Arts bldg, Land acquisition
  14. 14. G o a l o f e v e r y fi r m i s to m ax im izep re s e n t s h a r e h o ld e r v a lu e . Th i si m p li e s t h a t p r o je c t s t o b e u n d e rta k e ns h o u ld r e s u lt i n a p o s i t i v e n e t p re s e n tv a lu e , t h a t i s t h e p r e s e n t v a lu e o f th ee x p e c t e d c a s h i n flo w s le s s t h e p re s e n tv a lu e of th e need ed c a p i ta le x p e n d i tu re s .T h e r e i s a w i d e a r r a y o f c r i t e r i a fo rs e le c t i n g p r o je c t s . S o m e s t a k e h o ld e r sw a n t p r o je c t s w i t h i m m e d i a t e s u r g e si n c a s h flo w w h i le o t h e r s e m p h a s i z e o nlo n g t e r m g r o w t h w i t h li t t le s h o r t t e r mp e r fo r m a n c e . T h i s d i ffi c u lt y a r i s e s i ns a t i s fy i n g d i ffe r e n t i n te re s ts ofs t a k e h o ld e r s .
  15. 15. -takes the form of a loan or other borrowings (debt) proceeds of which are investedor used with the intent of earning a higher return than the cost of interest on theborrowing.If the firm’s ROA is higher than the rate of interest on the loan then ROE will behigher that if it did not borrow. But if the ROA is lower than the cost of borrowingthen the ROE will be lower. Borrowing is not recommended A corporation without borrowings is an all equity firm whereas a leverage firm is one with a mix of ownership equity and debt. The higher the debt means the firm is more leveraged. The extent of leveraging can show the potential positive returns a company may attain and the optimum levels that must be maintained to assure positive financial viability. Over leveraging in turn can cause the reverse.
  16. 16. Components of Working Capital•Cash•Marketable Securities•Inventory•A/R’s
  17. 17. Inventory and receivables are financed by trade suppliers (Just In Time Concept) It decreases working capital requirements and increases profits as working capital has costs(-) Negative Working Capital Cash is already received even prior to actual sales delivery and more so prior to payment to supplier •Credit card transactions e.g. Amazon (books), Dell (cellphone) Globe (prepaid cards) •HMO’s
  18. 18. Working Capital PolicyType o sho rm de s f rt-te bt•Short-term bank loans•trade credits•Commercial paper (iou’s)•Accrued liabilitiesA dvantages•Speed•flexibilityD isadvantages •High costs •Short-term dependability
  19. 19. Short-Term Loans•Bank Loans•Commercial Paper•Trade Credit•Revolving Credit Line•A/R Financing --Sale / Factoring / Discounting of A/R’s Long-Term Loans / Borrowing •Mortgage Loans - on Real Assets •Chattel Mortgage •Leasing --operating lease --financial lease •Bond floatation
  20. 20.  High A/R levels Mounting Promissory Notes Cash Flows (Erratic behavior) Pressures on A/P’s Need for CAPEX Huge debt Burden Decreasing Profit MarginsOpportunity Areas• Savings• Efficiencies• Corporate Social Responsibility• Ecological Support
  21. 21. Thank you for your time and participation!

×