Week 5 assignment HSA 525

TextInstructionsRead the following scenario, then draft a 3 page business memorandum to Linda Hoff, Stanford’sCFO.In your memo, codify your findings and interpretations from the horizontal and vertical analysesand the level of alignment in the company’s fiscal management and its strategic direction. Include anExcel spreadsheet as an attachment to the memo. In this memo you will:1. Review the year-over-year variances contained in the audited Stanford balance sheets andincome statements for fiscal years 201518 in the Week 5 Assignment Spreadsheet [XLSX].You’ll be expected to pay particular attention to the negative variances (color coded in red) thatyou believe to be potentially the most impactful to Stanford.2. Speculate as to the reasons for the negative variances.3. Examine the common size balance sheets and income statements looking for abnormally low orhigh ratios based on what you know about the line item and what you observe in the data for theother fiscal years.4. Look for patterns in the line items over the three-year period and identify any unusual findings thatmay need to be examined further.5. Assess the alignment of the organization’s fiscal management to the strategic direction of the firm.Fiscal management is based on your horizontal and vertical analyses. The strategic direction isbased on the vision, mission, and strategic priorities of Stanford.PurposeThe purpose of this assignment is to familiarize you with financial statements, the need to align thefinancials and the strategic direction of the firm, and the process of performing horizontal and verticalanalyses of a company’s balance sheets and income statements. 2020 Strayer University. All Rights Reserved. This document contains Strayer University Confidential and Proprietaryinformation and may not be copied, further distributed, or otherwise disclosed in whole or in part, without the expressedwritten permission of Strayer University.ScenarioYou’re a health care administration fellow at the prestigious Stanford Healthcare. You have beenrotating through the various departments over the past nine months and now you have the honor ofworking under the mentorship of Chief Financial Officer Linda Hoff.Stanford Medicine includes Stanford Healthcare, Stanford Children’s Hospital, and Lucile PackardChildren’s Hospital Stanford. This organization uses an integrated approach to strategic planning,which incorporates jointly agreed upon strategic priorities from its various entities. It also ensures ahigh degree of congruence in strategic focus by each entity. Before outlining the strategic prioritiesfor Stanford Medicine, it is important to note that a firm’s directional strategy comprises threediscrete yet interwoven components: vision, mission, and goals (or, in this case, priorities). Armedwith this knowledge, you have familiarized yourself with the vision, mission, and priorities of StanfordMedicine. Below is what you found. When examining a company’s financials, it is prudent to keepthe directional strategy of the company in mind. After all, in order to advance many strategicpriorities, which include fulfilling the mission and positioning the organization to achieve its vision forthe future, proper management of the firm’s scarce resources is vital. Failure to properly manage thefinancial performance of the organization can compromise the company’s ability to maintain acompetitive advantage in the marketplace.Our VisionPrecision Health: Predict. Prevent. Cure. Precisely.We will heal humanity through science and compassion by leading the biomedical revolution inprecision health.Our MissionImproving Human Health Through Discovery and Care.Through innovative discovery and the translation of new knowledge, Stanford Medicine improveshuman health locally and globally. We serve our community by providing outstanding andcompassionate care. We inspire and prepare the future leaders of science and medicine.Strategic PrioritiesA collaborative endeavor involving the entire community, the Stanford Medicine integrated strategicplanning process yielded a framework that is human centered and discovery led, focused on threeoverarching priorities for our enterprise. 2020 Strayer University. All Rights Reserved. This document contains Strayer University Confidential and Proprietaryinformation and may not be copied, further distributed, or otherwise disclosed in whole or in part, without the expressedwritten permission of Strayer University.By enhancing our strengths and achieving our goals in these priority areas, we will amplify ourpreeminence and remain uniquely positioned to lead the biomedical revolution in precisionhealth, ensuring our continued ability to guide health care through significant global changes.Value FocusedProvide a highly personalized patient experience.Ensure a seamless Stanford Medicine experience.Digitally DrivenAmplify the impact of Stanford innovation globally.Deliver human-centered, high-tech, high-touch care and revolutionize biomedical discovery.Lead in population health and data science.Uniquely StanfordAccelerate discovery in and knowledge of human biology.Discovered here, used everywhere: advance fundamental human knowledge, translationalmedicine, and global health.Ensure preeminence across all of our mission areas.Variance AnalysesNormally, managers are expected to examine positive and negative variances, and then speculateas to possible explanations for the observed variances. Following this initial assessment, managerswould be expected to dig deeper into those variances of greatest concern to the organization touncover the actual causes for the variances, and then implement necessary corrective actions.Digging into all variances would be costly and, quite frankly, a misuse of time and energy. The CFOhas asked you to conduct a variance analysis of the company’s consolidated balance sheets andincome statements for fiscal years 2015, 2016, 2017, and 2018, which you began. You havedetermined the variances for each account (line item) captured in the financials. Now that this firststep has been accomplished, the CFO would like you to pay particular attention to the negativevariances contained in the spreadsheet and focus on those variances you believe to be potentiallythe most impactful to Stanford.Once you’ve completed your variance analysis over time, which is referred to as a horizontalanalysis, you are ready to create a common size balance sheet and income statement of each ofthe four fiscal years (201518). You prepared the common sized financials, which are captured inyour spreadsheet. Now it is time to perform vertical and horizontal analyses of these common size 2020 Strayer University. All Rights Reserved. This document contains Strayer University Confidential and Proprietaryinformation and may not be copied, further distributed, or otherwise disclosed in whole or in part, without the expressedwritten permission of Strayer University.financials. The common size balance sheet allows you to see each asset relative to total assets aswell as each liability and net asset (in the case of nonprofit organizations) relative to total liabilitiesand net assets. In a common size income statement, each line item is expressed as a percentage oftotal revenue or sales. Common sizing balance sheets and income statements allows firms tocompare against one another even though they may be of different sizes. It also allows a firm tobenchmark its financial performance against comparative groups. In this case, there isn’t anycomparative data to benchmark against; however, you can examine the ratios in each fiscal yearand look to see if anything looks abnormally low or high based on what you know about the line itemand what you observe in the data for the other fiscal years (vertical analysis). You can also look forpatterns in the line items over the four fiscal years and point out any unusual findings that may needto be examined further (horizontal analysis). In finance, sometimes the organization establishesinterim goals and targets for certain line items in the financials. The firm can compare its actualperformance against the established goals and targets.Financial Management and Strategic DirectionOnce you’ve completed your horizontal and vertical analyses of the financial statements, you shouldbe able to get a sense of how well management has managed the financial resources of thecompany in support of its strategic direction. In business, the strategic direction should be evident inits vision and mission statements and strategic priorities. The strategic priorities should support thecompany’s mission, and the mission should help advance the firm’s vision for the future. Failure toeffectively manage the company’s financial resources can seriously compromise the firm’s ability tofulfill its mission and subsequently the vision.Business Memorandum to CFOUsing the analysis that you performed on Stanford Healthcare and trends that you identified, write abusiness memorandum to the CFO.In your memo, codify your findings and interpretations, andassess the alignment of the organization’s fiscal management to the firm’s strategic direction. Attachto the memo your analysis in an Excel spreadsheet.Your analysis and trends identified should takeinto account any feedback that you received from your professor and/or peers.Helpful hints: Negative variance is not always a bad thing. For example, you might see a slightincrease in the operating costs; however, if you achieved a positive variance in the total operatingrevenue that outpaced the increase in operating costs, that may be perceived as a positiveoutcome. Remember, you need to spend money to make money. We just want to make certain thatoperating expenses don’t outpace the growth in operating revenues. Also, keep in mind that somevariances are useful in explaining other variances even if these variances are associated withdifferent financial statements. For example, you may see an increase in operating costs, which is a 2020 Strayer University. All Rights Reserved. This document contains Strayer University Confidential and Proprietaryinformation and may not be copied, further distributed, or otherwise disclosed in whole or in part, without the expressedwritten permission of Strayer University.negative variance, but an increase in current assets, which is a positive variance. Furthermore, youshould look for patterns over time. This can reveal both positive and negative trends that mayprovide insight into the variances you discovered. For example, you may have noticed that a certainexpense has continued growth over the past 3 years (negative variance); however, the rate of growthyear-over-year has been declining. It could be that Stanford has implemented some cost-cuttingmeasures that are showing signs of working.This course requires the use of Strayer Writing Standards. For assistance and information, pleaserefer to the Strayer Writing Standards link in the left-hand menu of your course. Check with yourprofessor for any additional instructions.The specific learning outcome associated with this assignment is:Audit financial statements and expenditures for alignment with organizational strategicpriorities.The post Week 5 assignment HSA 525

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