Budgeting and Accounting Overview

The chief financial officer (CFO) of the hospital has asked for assistance. The CFO wants to create a document for new employees that explains financial information and the way it is used to evaluate a health care organization. You are asked to explain important concepts regarding the use of financial information.

Complete Parts 1 and 2 below.

Part 1: Financial Information

In the second column, thoroughly answer each question from the first column in your own words. In the third column, provide a specific example related to the question and your response. Each response should be at least 50 words.

Cite at least 2 scholarly sources to support the answers to the questions (one can be the textbook).

Format your citations and references according to APA guidelines.

Question	Response	Specific Example (If the question asks for multiple responses, provide an example for each response.)
Example: What are the 3 types of business organizations?	The 3 types of business organizations are sole-proprietor, partnerships (LLC), and corporations (C-corp/S-corp).	A sole proprietor would be a self-owned business such as an Etsy shop or a lawn Mainteniace or cleaning service. An example of an LLC would be an accounting or law firm. An example of a corporation would be a retail store such as Walmart.
How is financial information used to operate a health care organization on a day-to-day basis?
What are cash vs. accural accounting methods?
What is a pro forma income statement? What is its purpose?
What is a prepaid expense? What is its purpose?
Why is it important to identify your internal or external key stakeholder of the financial data?
As a department head, when would you use a budget? How would you use it?

Part 2: Short Answer:

Thoroughly answer each question below in your own words. Each response should be at least 50 words.

Example: Now that you have defined a pro forma income statement and its purpose, when would you use a pro forma income statement as a health care manager? The director of population health would like to purchase a new low-dose CT scan to perform a new service of lung screenings. The pro forma income statement details the expected volume, revenue, and related expenses.

1. Now that you have defined a pro forma income statement and its purpose, when would you use a pro forma income statement as a health care manager? How is this process similar to a budgeting process? Note: Your response must be different from the example provided above.
2. What is the importance of data analysis in the accounting process? How is it important to you as a health care manager?
3. What is depreciation and its 3 elements? How is straight-lined depreciation calculated? How is this used by health care managers?

The 3 basic tools for financial statements are ratio, horizontal, and vertical analysis.

1. What is the importance of ratio analysis? What are the four main categories? How would a health care manager use ratio analysis?
2. What is the importance of horizontal analysis? How would a health care manager use horizontal analysis?
3. What is the importance of vertical analysis? How would a health care manager use vertical analysis?