How can the financial performance of privately owned business be monitored? What are the main ways of monitoring to ensure the sound financial performance of an organization? Make use of examples to illustrate your arguments and answers.
Name: XIE Yang (Jasmine)
Tutor’s name: Diane Marsh
Word count: 1403
A primary responsibility of any business is to understand the financial situation. With this understanding, the company can run accordingly with management. Shen Yuchu (2005) illustrates that it is significant for the privately-owned firms to understand whether profit status influences performance. “Financial performance ...view middle of the document...
In order to make some typical examples, only privately-owned firm not-for-profit and privatizing company will be discussed in this essay. As a private nonprofit organization, the U.S. Health Resources and Services Administration’ Bureau of Primary Health Care (HRSA/BPHC) represents the privately-owned nonprofit entities. “The finance committee or governing board will usually take the lead in establishing financial measures, their goals and reviewing progress. They will be the primary reviewer of the identified information” (Fishel. L, 2012).
Privately-owned company not-for-profit
To measure the financial performance of HRSA/BPHC, the finance committee adopts some financial criteria, including independent financial audit, interim financial statements, grant application, “trend or other reports that includes the required and any supplemental financial statement measures, financial statement and trend report comments” (Zellweger. T et al, 2006).
More specifically, as the first consideration, independent financial audit is required to work with generally accepted accounting principles. More importantly, the financial statement data is validated by the audit. In addition, the audit makes qualifying statements on its validity. At the same time, the audit handles interim financial statement data and can adjust it. HRSA/BPHC evaluates the financial performance of grantees by audit data.
As the second measure, “the financial statements of a firm represent the usual starting point for any assessment of financial performance. In particular, a valuation of a firm begins with a review of its current financial condition and its recent results” (Bertonèche, M. & Knight, R., 2001). A balance sheet, an activity’s statement and a financial changes’ statement are the main sectors in financial statements. More precisely, in order to calculate the HRSA/BPHC required measures, the capital and the debts in a balance sheet should be divided into present and long-term parts. Besides, “actual, budget and variance columns for both the current and year-to-date amounts are usually included in the interim statement of activity” (Fishel. L, 2012). They are so-called budget performance columns. Furthermore, a statement of changes may replace a statement of net cash flow in financial position.
As the third measure, the procedure of grant application contains the recognition of different aims in various periods, positive and negative conditions and some contributing factors for improving financial performance.
As the fourth concern, in order to perfectly show the operation of different financial statement measure every month, a trend report is necessary monthly. HRSA/BPHC requires not only five required financial performance measures, but also four supplemental financial statement measures. Firstly, as for the required ones, there are “total cost per patient and medical cost per medical visit. These two measures are based on operating data, patients and visits....