Financial Management

The financial performance and financial position of an organization can be traced through its financial statements. At SouthSide ProCare, we use financial statements to obtain hospital revenues, current and projected profits, debts, and financial obligations. This information is obtained from four basic financial statements: the income statement, the balance sheet, the cash flow statement, and the statement of retained earnings.

The income statement is used to provide information about the hospital’s financial results within a given reporting period. It is the primary document that would be considered when reviewing the financial standing of an organization. The main parts of the income statement include revenue, cost of sales, gross margin, expenses, income, and loss (Chen, 2021). Revenue is calculated value for an increase in the company assets or clearance of company liabilities. The cost of sales is the accumulated costs of all products and services already sold within the time mentioned for the income statement. Gross margin is found by subtracting the cost of sales from revenues. Expenses are all spending within the hospital value chain except on the cost of sales, while income is the difference between gross margin and expenses. Income, usually net income or net loss, is the difference between revenues and expenses.

The balance sheet provides a summary of the hospital’s assets, liabilities, and equities at a given point in time. This information helps critique the liquidity and capitalization of the hospital. Note that an asset is an expenditure with utilitarian value in the hospital’s future accounts (Bragg, 2021). For example, medical equipment that will improve lab services is an asset. The difference between an asset and an expense mentioned above is that expenses do not have utilitarian value on future accounts. Liabilities are legally binding to pay an entity, such as wages, taxes, and expenses. They are settled using cash or assets. The net value of funds contributed to the hospital by the owners is referred to as equity. It also included retained earnings on the investment.

The statement of cash flow shows records for how cash flowed in and out during an accounting period. This helps in analyzing where the profit or loss came from and when. The statement of cash flow is often used to provide more information to the income statement. Its main components include operative activities, investing activities, and financing activities (Tim, 2021). Operating actives are those which concern revenue generation in the hospital, investing activities concern short-term or long-term acquisition of assets, and financing activities are the ones that affect or change the equity of the hospital or its borrowing capacity.

Lastly, the statement of retained earnings declares the changes that occurred to the hospital equities during the reporting period. Since this information mainly concerns the organization’s owners and investors, it is usually used during auditing. Besides, it is more tedious to prepare compared to other financial statements like a balance sheet. It also includes information obtained from other statements. For instance, the significant components of the statement of retained earnings include divided payment obtained from the cash flow statement. Other components include profit and loss and the sale or purchase of the hospital shares. Notably, this statement is also called the statement of shareholders’ equity.

To sum up, the income statement, the balance sheet, the cash flow statement, and the statement of retained profits are the most common four statements used in SouthSide ProCare. The income statement declares the hospital’s financial results within a given reporting period, and a balance sheet provides a summary of assets, liabilities, and equities. The cash flow statement shows cash in and out records within an accounting period, and the statement of retained earnings shows how the hospital equity has been changing.