MECHANISMS FOR EVALUATING FINANCIAL HEALTH OF HEALTH CARE Essay - 1

MECHANISMS FOR EVALUATING FINANCIAL HEALTH OF HEALTH CARE ORGANIZATIONS CS - Essay Example The total revenue for Pearland Medical Center reduced by $250,000,000 in the year 2013, compared to the revenue the firm had generated in the year 2012. At the same time, the operating expenses reduced by $200,000,000, which means that the net income of Pearland Medical Center reduced by $50,000,000 between the two years. The net revenue for 2012 and 2013 was $915,000,000 and $865,000,000 respectively. On the other hand, the total profit for the same period was $965,000,000 and $915,000,000 for 2012 and 2013 respectively. The cash flow of the Medical Center was equal to the total profit of the company since the inflow of the business was only through revenue and the cash outflow was through marketing, operating, research and education expenses. However, sinceBut depreciation is a non-cash flow item in this scenario, it should be used to establish the total profit and the net cash flow of Pearland Medical Center (Fridson & Alvarez, 2011). The profit margin measures how much every dollar revenue a firm keeps in its earnings (Albrecht & Albrecht, 2008). The total profit margin of the firm stood at 69% and 61% in 2013 and 2012 respectively. This means that the firm realized a net percentage of $0.69 and $0.61 for every dollar of sales. This showed that Pearland Medical Center’s ability to control its expenses, improved in 2013 as compared to 2012, and it is attributed to a reduction in operating expenses by $200,000,000. On the other hand, the total profit margin, excluding grants and investments, stood at 59% and 48% in 2013 and 2012 respectively. This implied that the firm’s earnings from every dollar it had invested reduced to 0.59 and 0.48 per dollar as a result of the exclusion of grants and investment in its revenue. Based on the income statement report, the firms financial health is not badly off because Pearland medical center made some positive returns from its investments. But if they are