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Omega Health Foundation

Essay by   •  January 14, 2013  •  Research Paper  •  1,015 Words (5 Pages)  •  1,251 Views

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Finances play a major role in part of decision-making of any industry that can have a conclusive affect on the processes of the business. Most health care organizations have significant changes within the industry; this is specifically because there are new trends available in the market industry which are impacted by the finance organization and the decisions that must be made. Most of the decisions within the health care industry are primarily reliant on the demand for health care services that are available to patients and the health care organization financial position. Health care administrators are enabling to analyze financial data obtained from financial report. These principles of finance report helps manager make well informed decisions.

Principles of Finance

The Omega Health Foundation is an example of principle of finance, which is "a complex business with two hospitals, Omega and Able Memorial, plus a number of related medical-service providers" (Cleverly & Cameron, 2007, p. 164).These principles of finances are risk-return trade off, time value of money (TVM), leverage, bond prices versus interest rates, portfolio effect, the matching principle, and liquidity versus profitability. By using the principles of finance it helps Omega Health Foundation because these are prepared to help the organizations financial statements and reports. Furthermore, the use of these financial statements like the balance sheet, income statement, statement of cash flows, and the statement of earning that offer management with a strong consideration of the health care organization's finances and its financial position.

Net Income and Cash Flows

Net income is when a company's amount of revenue is greater than the total expenses (Swanson, Ross, Hanson, Boynton 3rd, 1982). The total earnings of the company have been deducted from cost such as operational cost, depreciation have been calculated, and the taxes are paid after operational costs have been deducted, depreciation values are calculated, taxes have been paid, and all other expenses have been deducted and paid. Cash flow also has a substantial influence on the health care organization's financial point; this is regardless of the organization. To best define cash flow it is the money acquired by the company (e.g. Accounts receivable) and the monetary expenses paid by the company (e.g. Accounts payable) to continue the business's daily processes. The net income statement shows that the Omega Health Foundation has increased considerably in the fiscal year ending in 2009 as opposed to the fiscal year ending in 2008. Whereas, these two years gain an excess in cash flows (Cleverly & Cameron, 2007), the fiscal year ending in 2009 also proves a positive gain in cash and cash equivalents for the end of the year.

Market Value and Book Value of Assets

The financial statement for Omega Health Foundation also shows an increase in the accounts receivable from the patients ending 2009. The organizational assets must be well thought out, because the organizational assets are an important if interest is paid, which positions a financial benefit for the health care organization. Nevertheless, it is important that the organizations consider their assets, which can be affected, along with the finances and the prices of particular assets are market value versus book values. As times goes the price of investment will differ from the price of investment and fluctuate from market value.

When market values are reduced the organization is significantly



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