"Stanford Health Care Consolidated Statements of Operations and Changes in Net Assets Years Ending August 31, 2015, 2016, 2017, and 2018" "Common Size Balance Sheets Years Ending August 31, 2015, 2016, 2017, and 2018" Assets % of Change between 2018 & 2017 2018 ($) % of Change between 2017 & 2016 2017 ($) % of Change between 2016 & 2015 2016 ($) 2015 ($) 2018 (%) 2017 (%) 2016 (%) 2015 (%) Current assets: Cash and cash equivalents -8% 652,256 3% 710,109 45% 690,460 475,677 9.0% 11.4% 12.0% 8.6% Short term investments 68% 391,314 125% 233,533 2% 103,627 101,677 5.4% 3.7% 1.8% 1.8% Patient accounts receivable, net of allowance for doubtful accounts 2% 623,077 9% 610,734 2% 559,933 550,721 8.6% 9.8% 9.7% 10.0% Other receivables 11% 79,036 -24% 71,112 23% 92,961 75,427 1.1% 1.1% 1.6% 1.4% Inventories 4% 58,884 13% 56,559 16% 50,016 42,935 0.8% 0.9% 0.9% 0.8% Prepaid expenses and other 24% 52,886 17% 42,528 2% 36,273 35,486 0.7% 0.7% 0.6% 0.6% Total current assets 8% 1,857,453 12% 1,724,575 20% 1,533,270 1,281,923 25.7% 27.7% 26.6% 23.2% Investments 357% 509,781 -16% 111,664 3% 132,273 127,860 7.1% 1.8% 2.3% 2.3% Investments at equity 22% 80,989 66,255 1.1% 1.1% 0.0% 0.0% Investments in company managed pools 9% 1,400,839 -2% 1,287,193 -9% 1,316,489 1,440,352 19.4% 20.7% 22.9% 26.1% Assets limited as to use, held by trustee -100% -75% 58,134 -59% 235,788 580,701 0.0% 0.9% 4.1% 10.5% Property and equipment, net 14% 3,279,048 19% 2,869,346 25% 2,401,880 1,923,465 45.4% 46.1% 41.7% 34.9% Other assets -23% 86,739 -18% 112,445 -16% 137,637 163,578 1.2% 1.8% 2.4% 3.0% Total assets 16% 7,214,849 8% 6,229,612 4% 5,757,337 5,517,879 100.0% 100.0% 100.0% 100.0% Liabalities and net assets % of Change between 2018 & 2017 2018 % of Change between 2018 & 2017 2017 % of Change between 2018 & 2017 2016 2015 2018 2017 2016 2015 Current liabilities: Accounts payable and accrued liabilities 46% 449,192 -8% 307,899 19.1% 335,995 282,134 6.2% 4.9% 5.8% 5.1% Accrued salaries and related benefits -18% 209,490 8% 255,759 16.7% 236,819 202,859 2.9% 4.1% 4.1% 3.7% Due to related parties 39% 98,942 17% 71,429 41.5% 61,308 43,324 1.4% 1.1% 1.1% 0.8% Third-party payor settlements 90% 34,474 -21% 18,149 154.5% 22,948 9,018 0.5% 0.3% 0.4% 0.2% Current portion of long-term debt 9% 14,505 -3% 13,335 -1.3% 13,756 13,932 0.2% 0.2% 0.2% 0.3% Revolving line of credit -100% #DIV/0! 135,000 #DIV/0! 0.0% 2.2% 0.0% 0.0% Debt subject to short-term remarketing arrangements 0% 228,200 0% 228,200 0.0% 228,200 228,200 3.2% 3.7% 4.0% 4.1% Self-insurance reserves and other 20% 54,933 6% 45,854 23.8% 43,232 34,918 0.8% 0.7% 0.8% 0.6% Total current liabilities 1% 1,089,736 14% 1,075,625 15.7% 942,258 814,385 15.1% 17.3% 16.4% 14.8% Self-insurance reserves and others, net of current portion 7% 139,841 10% 130,816 -1.1% 118,994 120,364 1.9% 2.1% 2.1% 2.2% Swap liability -26% 182,527 #DIV/0! 245,966 #DIV/0! 2.5% 3.9% 0.0% 0.0% Other long-term liabilities 292% 122,944 -91% 31,363 51.4% 355,683 234,855 1.7% 0.5% 6.2% 4.3% Pension liability -87% 6,650 -21% 51,745 27.8% 65,463 51,220 0.1% 0.8% 1.1% 0.9% Long-term debt, net of current portion 44% 1,711,967 -3% 1,189,529 -1.3% 1,220,789 1,237,347 23.7% 19.1% 21.2% 22.4% Total liabilities 19% 3,253,665 1% 2,725,044 10.0% 2,703,187 2,458,171 45.1% 43.7% 47.0% 44.5% Net assets: Unrestricted: Stanford Health Care 14% 3,285,398 17% 2,871,113 -0.7% 2,449,037 2,467,393 45.5% 46.1% 42.5% 44.7% Nonconrolling interests -15% 18,727 10% 22,060 -12.4% 20,133 22,979 0.3% 0.4% 0.3% 0.4% Total unrestricted 14% 3,304,125 17% 2,893,173 -0.9% 2,469,170 2,490,372 45.8% 46.4% 42.9% 45.1% Temporarily restricted 8% 648,826 5% 603,251 2.7% 577,086 561,642 9.0% 9.7% 10.0% 10.2% Permanently restricted 1% 8,233 3% 8,144 2.6% 7,894 7,694 0.1% 0.1% 0.1% 0.1% Total net assets 13% 3,961,184 15% 3,504,568 -0.2% 3,054,150 3,059,708 54.9% 56.3% 53.0% 55.5% Total liabilities and net assets 16% 7,214,849 8% 6,229,612 4.3% 5,757,337 5,517,879 100.0% 100.0% 100.0% 100.0% Week 5 Assignment - Strategic Financial Analysis Overview The purpose of this assignment is to familiarize you with financial statements, the need to align the financials and the strategic direction of the firm, and the process of performing horizontal and vertical analyses of a company's balance sheets and income statements. You will be provided with a scenario and a variances analysis. You will use the information in both to create a memo in which you demonstrate your audit financial statements and expenditures based on organizational priorities. Instructions Scenario You're a healthcare administration fellow at the prestigious Stanford Healthcare. You have been rotating through the various departments over the past nine months and now you have the honor of working under the mentorship of Chief Financial Officer Linda Hoff. Stanford Medicine includes Stanford Healthcare, Stanford Children's Hospital, and Lucile Packard Children'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 a high degree of congruence in strategic focus by each entity. Before outlining the strategic priorities for Stanford Medicine, it is important to note that a firm's directional strategy comprises three discrete yet interwoven components: vision, mission, and goals (or, in this case, priorities). Armed with this knowledge, you have familiarized yourself with the vision, mission, and priorities of Stanford Medicine. Below is what you found. When examining a company's financials, it is prudent to keep the directional strategy of the company in mind. After all, in order to advance many strategic priorities, which include fulfilling the mission and positioning the organization to achieve its vision for the future, proper management of the firm's scarce resources is vital. Failure to properly manage the financial performance of the organization can compromise the company's ability to maintain a competitive advantage in the marketplace. Our Vision Precision Health: Predict. Prevent. Cure. Precisely. We will heal humanity through science and compassion by leading the biomedical revolution in precision health. Our Mission Improving Human Health Through Discovery and Care. Through innovative discovery and the translation of new knowledge, Stanford Medicine improves human health locally and globally. We serve our community by providing outstanding and compassionate care. We inspire and prepare the future leaders of science and medicine. Strategic Priorities A collaborative endeavor involving the entire community, the Stanford Medicine integrated strategic planning process yielded a framework that is human-centered and discovery-led, focused on three overarching priorities for our enterprise. By enhancing our strengths and achieving our goals in these priority areas, we will amplify our preeminence and remain uniquely positioned to lead the biomedical revolution in precision health,ensuring our continued ability to guide healthcare through significant global changes. Value Focused Provide a highly personalized patient experience. Ensure a seamless Stanford Medicine experience. Digitally Driven Amplify 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 Stanford Accelerate discovery in and knowledge of human biology. Discovered here, used everywhere: advance fundamental human knowledge, translational medicine, and global health. Ensure preeminence across all our mission areas. Variance Analyses Normally, managers are expected to examine positiveandnegative variances, and then speculate as to possible explanations for the observed variances. Following this initial assessment, managers would be expected to dig deeper into those variances of greatest concern to the organization to uncover the actual causes for the variances, and then implement necessary corrective actions. Digging into allvariances would be costly and, quite frankly, a misuse of time and energy. The CFO asked one of her financial analysts to conduct a variance analysis of the company's consolidated balance sheets and income statements for fiscal years 2015, 2016, 2017, and 2018, which has been completed. The analyst determined the variances for each account (line item) captured in the financials. Now that this first step has been accomplished, the CFO would like you to pay particular attention to the negative variances contained in the spreadsheet and focus on those variances you believeto be potentially the most impactful to Stanford. The financial analyst completed your variance analysis over time, which is referred to as ahorizontal analysis, and then proceeded to createa common size balance sheet and income statement of each of the four fiscal years (20152018). The common sized financials are captured in the provided spreadsheet. Financial Management and Strategic Direction Once you've completed your horizontal and vertical analyses of the financial statements, you should be able to get a sense of how well management has managed the financial resources of the company in support of its strategic direction. In business, the strategic direction should be evident in its vision and mission statements and strategic priorities. The strategic priorities should support the company's mission, and the mission should help advance the firm's vision for the future. Failure to effectively manage the company's financial resources can seriously compromise the firm's ability to fulfill its mission and, subsequently, the vision. Submission Based on the provided scenario, create a 34 page business memorandum to Linda Hoff, Stanford's CFO.For guidance on writing a memo, take a look at this Sample Memo [DOCX]. In your memo, codify your findings and interpretations from the horizontal and vertical analyses and the level of alignment in the company's fiscal management and its strategic direction. Include the provided Excel spreadsheet you used to complete your analysis as an attachment to the memo. In this memo, you will: Review the year-over-year variances contained in the audited Stanford balance sheets and income statements for fiscal years 20152018 in the Week 5 Assignment Spreadsheet [XLSX]. You'll be expected to pay particular attention to the negative variances (color coded in red) that you believe to be potentially the most impactful to Stanford and provide a rationale for that belief. Hypothesize as to the reasons for the negative variances. Be sure the hypothesis is supported by evidence from the scenario, the balance sheets, and income statements. Explain the proportional changes in the common size results over the four fiscal year time frame and identify notable changes in the ratios. Also include a hypothesis, supported by a rationale, to suggest why these anomalies may exist. Identify notable patterns and variances that warrant further investigating and justify both with evidence from the three- year period. Specify potential consequences of the variances to justify the need to examine these variances further. Assess whether the vision, mission, and goals of the organization are aligned with their current financial position and provide an explanation of why it does or does not align. Provides specifics from the variance analysis to support the assessment.