NURS 6211: Finance and Economics in Health Care Delivery | Week 8

Six months have passed and your university clinic has been allowed to remain open. As you review the expenditures for those past six months, you are surprised to see how high certain costs have risen. As you reflect back, you are reminded of the flu epidemic that hit the university and affected many more students than you planned on needing services. Does this epidemic account for all of the increased costs? Could there be some other factors that contributed to the overspending?

This week you focus on key analytical tools used for determining the extent that different factors explain discrepancies from the original budget.

 

Learning Objectives NURS 6211: Week 8: Variance Analysis Paper

Students will:

• Assess the importance of financial analytical tools in decision making
• Apply volume adjusted variance analysis to financial decision making

Learning Resources

Note: To access this Week’s required library resources, please click on the link to the Course Readings List, found in the Course Materials section of your Syllabus.

Required Readings 

Baker, J. J., Baker, R. W., & Dworkin, N. R.  (2018). Health care finance: Basic tools for nonfinancial managers (5th ed.). Burlington, MA: Jones and Bartlett Learning.

• Chapter 18, “Variance Analysis and Sensitivity Analysis” (pp. 211-222)This chapter introduces variance analysis and how it can be used as a financial tool for determining the reasons behind budget overlays.

Zelman, W., McCue, M., & Glick, N. (2009). Financial management of health care organizations: An introduction to fundamental tools, concepts, and applications (3rd ed.). Hoboken, NJ: Jossey-Bass.

Retrieved from the Walden Library databases.

• Chapter 11, “Responsibility Accounting” (pp. 469–497)This chapter explores the trend toward the decentralization of health care organizations and the challenges this presents. This chapter also describes responsibility centers, or organizational units intended to achieve specific tasks.

Cross,V. (2015). The role of variance analysis in businesses. Small Business by Demand Media. As retrieved from http://smallbusiness.chron.com/role-variance-analysis-businesses-22641.html

Garcia, M. (2015). What does an unfavorable variance indicate? Small Business by Demand Media. As retrieved from; http://smallbusiness.chron.com/unfavorable-variance-indicate-81570.html

Markgraf, B. (2015). What is budget variance analysis? Houston Chronicle. Retrieved from http://smallbusiness.chron.com/budget-variance-analysis-60250.html

Document: Week 8 Application Assignment Template

Document: Finance and Economics in Healthcare Delivery Transcript (PDF)

Required Media

Laureate Education (Producer). (2012). Variance analysis Baltimore, MD: Author.

In this video, William Ward discusses the importance of using variance analysis as a financial decision making tool. He uses a simple scenario to demonstrate how to conduct a variance analysis.

Laureate Education (Producer). (2015). Week 8 Application Assignment Tutorial: Variance Analysis. Baltimore, MD: Author.

In this video, William Ward discusses the importance of using variance analysis as a financial decision making tool. He uses a simple scenario to demonstrate how to conduct a variance analysis.

Optional Resources

Hurlock J. (2012). Get to know Excel 2010: Create your first spreadsheet. Retrieved from http://office.microsoft.com/en-us/excel-help/get-to-know-excel-2010-create-your-first-spreadsheet-RZ101773335.aspx

Goodwill Community Foundation, Inc. (n.d.). Excel 2010. Retrieved from http://www.gcflearnfree.org/excel201

Discussion

There is no graded Discussion Board assignment this week; however, a Week 8 optional discussion board is available for your voluntary participation this week.

 

ADDITIONAL INFO 

The importance of financial analytical tools in decision making

Introduction

Investing is often a bureaucratic process and can be made more effective with the use of financial analysis tools.

What is financial analysis?

Financial analysis is the process of collecting and analyzing financial information to make decisions. It’s used by internal management, external stakeholders, and investors.

Financial analysis can be used to make investment decisions and operational decisions (such as how much you spend on marketing).

How is a financial analyst’s performance measured?

Financial analysts are measured on their ability to make accurate predictions. They are also measured on their ability to communicate their analysis. This depends on the organization and the role they play, but in general it can be measured through metrics such as return on investment (ROI), cost savings and efficiency.

Financial analysts are also responsible for making recommendations and providing guidance to management. This can be done in a variety of ways, from presenting findings in an executive meeting to writing reports and white papers.

Tools in financial analysis

Financial analysis tools are used in the decision-making process to help you understand your company’s financial position and make decisions.

• Financial ratios: Ratios help you compare different parts of an entity with each other by dividing one number by another. For example, a ratio can be used to determine whether a business is profitable or not based on its current assets and liabilities (i.e., how much money it has vs how much it owes).

• Discounted Cash Flow: The discounted cash flow method is used when analyzing investment opportunities because it involves calculating the present value of future earnings over time based on market interest rates at which investments can be bought/sold (and what they cost today). It allows investors to gauge whether their potential returns will meet expectations given their risk tolerance level—how much risk they’re willing to take—and how much more money they’ll need if things go wrong later down the line

Financial analysis can be used by internal management and external stakeholders to make investment decisions.

Financial analysis can be used by internal management and external stakeholders to make investment decisions. It is a tool that helps provide insight on the performance of an organization, which then allows for better decision making.

Financial analysts use financial analysis to measure their performance against goals or objectives set by managers or senior executives in the business unit (or division). This information allows them to determine if they are meeting these expectations or not; if so then it gives them an idea about how good their job really is!

Conclusion

The purpose of financial analysis is to help select the right investments for a company. It can be used by internal management and external stakeholders to make investment decisions and monitor performance. A financial analyst’s performance is measured by the value of the company’s assets, debt levels and cash flow as well as any other factors that affect these metrics.