The Financial Statements Are Key in Any Business Discussion

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Eva Young-Hayden:

Financial statements are an integral part of any business. Understanding what a financial statement and how to read one is key to not only internally, but often to the outside as well, depending on the business. A financial statement is used to determine the financial status of a business (Reiter, 2018). These statements are important to different people for different reasons. A financial statement is important to managers for many reasons. One main reason is to make sure that they are maintaining and not exceeding the budget when purchasing items. Reviewing the statements gives managers the idea of the number of staff that can be hired, the amount that they cause use for employee salaries as well as bonuses if it is a company that offers bonuses. Managers can also use the financial statements to review the expectations for projecting future budgets and capital expenditures. They can be used to determine if a company is operating and generating a profit or a deficit.

Financial statements are important to those outside parties as well. You may have a company or facility where funding is based on investors. Each investor is interested in how the facility is being run and review if their investment is paying off.  These statements are also presented to outsiders that the facilities are interested in them becoming investors. A for profit hospital can invest money and have money on reserve and that money can make interest which would be considered income, where a non-profit works with donations and that money is not considered income (Reiter, 2018).

Reiter, K. (2018). Gapenski’s Fundamentals of Healthcare Finance, Third Edition (Gateway to Healthcare Management)(3rd ed.). Health Administration Press. 

Raydel: 

Financial statements are used both internally to determine the status or success of a business as well as externally to help investors understand the strength of a business and potentially increase stock prices (Retier, 2018). Financial statements include the balance sheet, an income statement, and cash flow statements (Reiter, 2018).  They are all important for different reasons.  The balance sheet helps determine the net worth of a business.  From a manager’s perspective, this will help determine if the business is succeeding or failing and can be used to find areas that need improvement (Stobierski, 2020a).  It is a tally of a business’s liabilities, assets, and equity which can also help investors determine the resources a business has available to help it succeed (Stobierski, 2020a). 

The income statement is used to determine the company’s financial performance.  This does not include the assets seen on the balance sheet.  This is used by managers and investors to help determine the future profitability of a company and helps to determine the need for cuts or working towards growth (Stobierski, 2020c). 

The cash flow statement breaks down direct income and expenses.  For a business to be profitable, the cash income should exceed the profit of the company (Stobierski, 2020b).  This would mean that the company is able to meet monetary demands and is either growing or stable.  While all negative cash flow does not mean that the company is making a profit, it will point to either an unexpected expense or area that needs to be resolved quickly.  If a company has good cash flow, it means it is safer to invest in.  If there is a good positive cash flow, consistently, it may be a good time for managers and executives to think about growing the company more (Stobierski, 2020b).

These statements mean different things for non-profit and for-profit businesses.  In a for-profit company, growth in most financial documents will mean greater faith in the company and raise stock prices.  To avoid false growth, the SEC has established GAAP rules aimed to make the numbers reliable (Reiter, 2018).  Companies like Enron were able to find ways to minimize liability reporting though and falsely drive up the value of their stock even though the company had a CPA checking the accuracy of the data (Benston, 2002).  If a not-for-profit business shows growth, then it will usually use the surplus to reinvest into the company.  This can be new training, new equipment, starting a new line of service etcetera. No matter the type of company, the documents can be very complicated to understand but are still very important to judge the direction the business is heading. 

Justine: 

The article I found was about health disparities in obesity. Eliminating health disparities by race, ethnicity, and socioeconomic status (SES) is a big priority in America and all over the world (Rossen, & Schoendorf, 2012). Obesity is a global burden and is projected to increase drastically during the next 20 years (Rossen, & Schoendorf, 2012). The United States (U.S.) holds the greatest rates of obesity and recent estimates show that 17 percent of U.S. youth have a body mass index (BMI) greater than or equal to the 95th percentile for their age and gender (Rossen, & Schoendorf, 2012). There is a lot of research to prove that sociodemographic an economic disparities exist in reference to obesity. Studies about childhood obesity show that disparities have increased among our youth.

The article did not provide many causes but they did mention that the reason these health disparities are increasing is because strategies to achieve elimination of health disparities have not yet been implemented on a wide enough scale to make a difference on a national level (Rossen, & Schoendorf, 2012). One of the things that stood out to me was that regardless of efforts, addressing the obesity epidemic could worsen racial/ethnic and SES disparities because the groups that are better off would more likely benefit from the incentives. Incentives such as, improving school lunches may disproportionately benefit kids attending schools with more resources than others (Rossen, & Schoendorf, 2012).

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