NUR 621 Balance Sheet

Sample Answer

Introduction

This presentation provides an overview of the financial statements for Hospital Anywhere USA for the years ending 2019, 2018, and 2017. The focus is on the consolidated balance sheet derived from the income statement, including assets, liabilities, stockholders’ equity, revenue, expenses, and cash flow.

This presentation evaluates our consolidated balance sheet and provides a view of Hospital Anywhere USA’s financial position as of December 31, 2019. The balance sheet is based on the accounting equation, as Mashoka (2022) shows Assets = Liabilities + Stockholders’ Equity.

As we can see, our total assets amount to $29.624 billion, balanced by our total liabilities of $22.157 billion and stockholders’ equity of $7.467 billion. This balance demonstrates our financial position at the end of 2019. The assets represent what our hospital owns or controls, while liabilities encompass our financial obligations.

The stockholders’ equity represents the net worth of our hospital after all liabilities have been accounted for. In the following slides, we’ll examine each component in more detail.

Assets Overview

Research guides that the assets section of the balance sheet reveals the hospital’s liquidity and investment in long-term resources (Abdulazizovich, 2023). Cash and cash equivalents increased to $314 million, indicating improved liquidity. The significant property and equipment value of $5.297 billion reflects the hospital’s investment in infrastructure and technology. Accounts Receivable at $2.893 billion suggests efficient billing practices, but also highlights the need for effective receivables management.

Current Assets

Current assets are crucial for our day-to-day operations and financial liquidity. Our current assets include several vital components. Cash and cash equivalents represent a significant portion of these assets, offering liquidity that can be used to meet short-term obligations and fund ongoing operations (Fridson & Alvarez, 2002).

They were at $314 million as of December 31st, 2019. Another critical component is accounts receivable, which includes amounts owed to the hospital by patients and insurance companies for services rendered, with an allowance for doubtful accounts of $1.583 billion in the same financial year.

This figure, net of allowances for doubtful accounts, indicates the hospital’s efficiency in managing its billing and collections processes (Fridson & Alvarez, 2002). On the other hand, inventories include medical supplies and pharmaceuticals essential for patient care, which amounted to $ 90 million for the 2019 financial year. We also have income taxes receivable and other current assets under this category.

Properties and Equipment

The most considerable portion of the assets, however, is in property and equipment, which includes land, buildings, equipment, and ongoing construction projects. These assets’ purchases amounted to $1.155 billion in 2019. These long-term assets are vital for the hospital’s ability to provide high-quality care and expand its services.

The breakdown of these assets shows the hospital’s current financial strength and its capacity to invest in future growth (Barker et al., 2021). We also have ongoing construction projects in the “Construction in progress” line item. The total property and equipment figure represents the cost of these assets.

It’s important to note that we also report accumulated depreciation, reflecting our assets’ wear and tear over time (Barker et al., 2021). This approach ensures that our balance sheet accurately represents the current value of these long-term assets.

Non-Current Assets

In addition to our current assets, property, and equipment, we hold several other significant assets. These include investments in our insurance subsidiary and investments in and advances to affiliates. We also report intangible assets, showing net accumulated amortization of $785 million as of 2019. The ‘Other’ category encompasses assets that don’t fit the previous categories (Batrancea, 2021). These assets contribute to our overall financial position and support our operations.

Liabilities Overview

In 2019, “Hospital Anywhere USA” reported total liabilities of $22.157 billion. This figure represents the hospital’s financial obligations and includes several key components crucial for understanding its risk exposure, categorized into current or long-term liabilities. Dambra et al. (2022) report that current liabilities are due within one year, including accounts payable and accrued salaries.

Comparatively, long-term debt represents our financial obligations extending beyond one year. We also have other long-term liabilities, which include professional liability risks, deferred taxes, and other liabilities. Understanding our liability structure is crucial for assessing our financial obligations and planning for the future.

Current Liabilities

Accounts payable, one of the current liabilities, refers to the amounts the hospital owes to suppliers and vendors for goods and services received. Managing these payables efficiently is essential to maintain good supplier relationships and ensure the hospital’s operations run smoothly (Abdulazizovich, 2023). Accrued salaries and other expenses represent another significant portion of the hospital’s liabilities.

We also have other accrued expenses and a government settlement accrual. Additionally, we report the portion of our long-term debt due within one year as part of our current liabilities. These are obligations to employees for salaries earned but not yet paid and other expenses that have been incurred but not yet settled.

Long-Term Liabilities

Our long-term liabilities comprise several components. The primary component is our long-term debt, representing financial obligations extending beyond one year. We also have grouped professional liability risks, deferred taxes, and other liabilities.

Additionally, we report minority interests in equity of consolidated entities, forward purchase contracts, and put options (van Straten et al., 2020). These long-term liabilities are crucial for understanding our extended financial commitments and potential future obligations.

Long-term debt indicates that the hospital has leveraged financing to fund capital projects, such as expansions or equipment purchases, which are critical for its growth and service delivery. However, this also means the hospital must generate sufficient revenue to meet these obligations without compromising its financial stability.

Stockholders’ Equity Overview

As of December 31, 2019, our total stockholders’ equity is $7,467 million. This figure, based on the four main categories of stakeholders’ equity—Common Stock, Capital in Excess of Par Value, Accumulated Other Comprehensive Income, and Retained Earnings—is a crucial indicator of our financial health and represents the value that would be returned to shareholders if all assets were liquidated and all debts paid off (Mashoka, 2022). In the following slides, a breakdown of the components of this equity will be provided.

Components of Stakeholders’ Equity

Our stockholders’ equity comprises several elements. Common Stock represents the value of shares issued by the hospital and held by shareholders. We have common stock with a par value of $0.01, with 1,600,000,000 voting shares and 50,000,000 nonvoting shares authorized. As of 2019, we have 521,991,700 voting shares outstanding.

We also report capital over par value, which represents the additional capital contributed by shareholders over and above the nominal value of the shares, reflecting investor confidence and the hospital’s capacity to raise capital (Rosko et al., 2020). Gou (2020) elaborates further that Accumulated Other Comprehensive Income captures gains and losses not included in the net income, such as unrealized gains or losses on investments, foreign currency translation adjustments, and pension plan adjustments.

This component adds a layer of complexity to the hospital’s equity, as it can be volatile depending on market conditions and other external factors. Finally, Retained Earnings represent the cumulative profits that the hospital has reinvested in its operations rather than distributed as dividends. This segment indicates the hospital’s ability to generate and retain profits over time, which is crucial for funding future growth and absorbing potential losses (Gou, 2020). These components collectively represent the ownership interest in our hospital.

Revenue Overview

The total revenue for Hospital Anywhere USA in 2019 was $16.670 billion, slightly higher than the $16.657 billion generated in 2018. This steady revenue stream indicates the hospital’s ability to maintain a consistent income despite the healthcare industry’s challenges (Pitcher et al., 2023).

Revenue is the lifeblood of the hospital, providing the necessary funds to cover operating expenses, invest in new technologies, and expand services. It is generated primarily through patient services, including inpatient care, outpatient services, and other medical procedures.

Although modest, the slight increase in revenue from 2018 to 2019 demonstrates the hospital’s resilience and effectiveness in maintaining its patient base and service offerings. Additionally, this consistent revenue is crucial for the hospital’s long-term financial stability, allowing it to meet its obligations and reinvest in its operations.

Expenses Overview

In 2019, Hospital Anywhere USA incurred total expenses of $16.070 billion, a significant figure that reflects the costs associated with running a large healthcare institution. These expenses are categorized into several key areas, each critical to the hospital’s operations.

Salaries and benefits represent the most significant portion of these expenses, as the hospital employs many medical professionals, administrative staff, and support personnel. The quality of care provided by the hospital is directly tied to its ability to attract and retain skilled employees, making this an essential area of expenditure.

Supplies, which include medical equipment, pharmaceuticals, and other necessary materials, are another major expense category. These supplies are vital for the hospital’s daily operations and directly impact patients’ quality of care. Other operating expenses include utilities, maintenance, and other essential services that keep the hospital running smoothly (Batrancea, 2021).

Additionally, the hospital must account for depreciation and amortization, which represent the gradual reduction in the value of its long-term assets over time. Interest expense, another significant cost, reflects the interest payments on the hospital’s long-term.

Cash Flow Overview

The cash flow from operating activities for “Hospital Anywhere USA” in 2019 was $1.547 billion, up from $1.223 billion in 2018. This positive cash flow strongly indicates the hospital’s ability to generate sufficient cash from its core operations to cover its expenses and fund its ongoing activities, as explained by Mashoka (2022).

Cash flow from operating activities includes all the cash generated by the hospital’s daily operations, such as payments from patients and insurance companies, minus the cash paid out for operating expenses like salaries, supplies, and utilities. The increase in cash flow from 2018 to 2019 demonstrates the hospital’s efficiency in managing its operations and collecting payments, which is crucial for maintaining liquidity and financial stability.

A strong cash flow from operations is essential for the hospital as it provides the necessary funds to reinvest in the business, pay down debt, and prepare for future challenges.

Conclusion

Our total assets are $29.624 billion, balanced by total liabilities of $22.157 billion and stockholders’ equity of $7.467 billion. These figures provide a snapshot of our financial position as of December 31, 2019. The balance between our assets and liabilities, resulting in a positive equity, indicates financial stability.

However, a comprehensive understanding of our economic health would require additional information from other financial statements and year-over-year comparisons. Moving forward, we’ll continue to focus on maintaining a solid financial position while providing high-quality healthcare services to our community.

References

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• Barker, R., Lennard, A., Penman, S., & Teixeira, A. (2021). Accounting for intangible assets Suggested solutions. Accounting and Business Research, 52(6), 1–30. https //doi.org/10.1080/00014788.2021.1938963
  
• Batrancea, L. (2021). The influence of liquidity and solvency on performance within the healthcare industry Evidence from publicly listed companies. Mathematics, 9(18), 2231. mdpi. https //doi.org/10.3390/math9182231
  
• Dambra, M., Even-Tov, O., & Naughton, J. P. (2022). The economic consequences of GASB financial statement disclosure. Journal of Accounting and Economics, 101555. https //doi.org/10.1016/j.jacceco.2022.101555
  
• Fridson, M. S., & Alvarez, F. (2002). Financial statement analysis A practitioner’s guide. John Wiley & Sons.
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• Mashoka, T. Z. (2022). The effect of fair-value accounting on the value relevance of the balance sheet and the income statement. Jordan Journal of Business Administration, 18(4). https //doi.org/10.35516/jjba.v18i4.456
  
• Pitcher, A., Zhang, R., Gurzenda, S., Pink, G., & Reiter, K. (2023). Non-operating revenue is an important source of funding for rural hospitals, especially those that are government-owned. The Journal of Rural Health Official Journal of the American Rural Health Association and the National Rural Health Care Association. https //doi.org/10.1111/jrh.12797
  
• Rosko, M., Al-Amin, M., & Tavakoli, M. (2020). Efficiency and profitability in US not-for-profit hospitals. International Journal of Health Economics and Management, 20(4). https //doi.org/10.1007/s10754-020-09284-0
  
• van Straten, B., Dankelman, J., van der Eijk, A., & Horeman, T. (2020). A circular healthcare economy; a feasibility study to reduce surgical stainless steel waste. Sustainable Production and Consumption. https //doi.org/10.1016/j.spc.2020.10.030