Question 1
Financial information is defined as the data about monetary transactions of an individual or organization. In Healthcare, financial information is crucial because it informs about financial health/progress. Four critical financial statements are often used to report financial information of Health Care Organizations. These include; balance sheet, income statement, statement of shareholders’ equity, and statement of cash flow. A balance sheet shows a record of assets, liabilities, and net assets/ equity of an organization at a specified date. The format of a balance is structured in a way that demonstrates that the total assets are equal to the total of liabilities and net assets/equity. This financial statement is the second important to health care organizations because it shows the institution’s liquidity and capitalization.
An income statement, also known as a statement of revenues and expenses, shows the revenues and expenses of an organization for a given period being reported. This is the most important financial statements to health care organizations because it displays the total collection of funds, the total funds expensed, and the closing amount for the period being reported. A statement of shareholders’ equity states the changes in equity for a specific period of time being reported. This statement is usually of least use to healthcare organizations and is mostly prepared for its inclusion in the audited financial statements. Lastly, a statement of cash flow records the cash generated (cash inflows) and cash used (cash outflows) for a specific period. This statement is important and is usually presented to the public when offering financial statements to the public. Financial information is vital to both internal and external decision-makers in the health care industry.
Question 2
There are five core principles that guide the manner in which financial information is prepared and disseminated in the healthcare organizations. They include; entity of accounting, money measurement, duality, cost valuation, and the stable monetary unit. The principle of accounting entity involves specifying the entity in which accounting will be focused. For instance, Alpha HCO is the organization/entity for which financial statements will be prepared. The underlying concept of accounting entity is to set boundaries from which financial information will be obtained and recorded.
The principle of money measurement emphasizes on the use of money as the unit of measure. This is because financial accounting mainly relates to the concept of measuring the economic resources and obligations together with their levels of change. Economic resources may also be called company assets, whereas economic obligations may be called company liabilities.
The principle of duality is based on a simple accounting requirement. This requirement is that the total value of an organization’s assets ought to be equal to the total value of liabilities combined with the total equity. Assets = Liabilities + Equity. This principle means that where the values of assets, liabilities, and equity are provided, the value of assets should balance with the value of the combination of liabilities and equity.
The principle of cost valuation is associated with the determination of values of assets and liabilities. Two methods mostly used for valuation are the market value and replacement cost methods. Use of market value enables creditors to approximate the assets’ value as per the current market prices, although it is less efficient compared to replacement valuation. Replacement valuation helps many decision-makers considering that asset values are determined based on the cost likely to be incurred when replacing a particular asset. Lastly, the principle of a stable monetary unit is associated with the use of a stable monetary unit when determining asset values.
Question 3
Budgeting involves coordinating both financial and non-financial plans to be able to achieve organizational objectives and goals. Strategic planning, on the other hand, involves defining a strategy and making decisions of allocating resources to proceed along the strategy. Both budgeting and strategic planning are essential concepts to organizations. The process of budgeting enables institutions to plan future business activities through the establishment of performance goals. This process requires managers and members of the board to sit together and discuss where they would like to see the company, the markets they would like to exploit then discuss the ways of creating opportunities and keeping track of the progress.
The process of strategic planning involves several steps that include; determining objectives and mission, carrying out environmental analysis, self-appraisal for strengths and weaknesses, performing strategic decision making, and implementing & controlling strategies. Strategic planning is independent, unlike budgeting which is reliant on strategic planning. Budgeting is specifically meant to ensure the achievement of strategic plans via the allocation of monetary resources. Additionally, budgets may be used to influence strategic plans on the basis of the amount expected and the goals that ought to be accomplished. Budgeting and strategic planning are both focused on the identification of opportunities that may fit the budget of a certain organization in order to bring about change within the organization.
Question 4
The current COVID-19 pandemic has been moving at an alarming speed spreading from the Far East to Europe and America. It is becoming more apparent that its effect upon the health care system goes beyond the disease it causes. Currently, health care systems in Saudi Arabia have been forced to cope with the levels of non-communicable conditions that already exist. The pandemic has brought about a considerable challenge to the operations of healthcare, considering that they cannot be able to manage the increasing numbers of patients needing care due to COVID-19.
Initially, primary care had been holding the promise that problems of access and attention could be provided digitally, although the scale of actual adoption is what had been disappointing. The aspiration of digitalization of health care, therefore, had to be tempered by the reality of the slow rate of adoption unlike it had been anticipated. However, the patterns have changed, and currently, digital transformation has occurred due to the COVID-19 pandemic and actually serves as the leading solution to the limited access of health care systems.
Additionally, digital solutions have continued to be adopted not only in Saudi Arabia but also in many other nations globally. Technology has been integrated into the existing systems of healthcare systems ranging from system surveillance, linkage of data in laboratories, linkage of testing results in different locations, to the technology of tracing contacts via the use of smartphones. The pandemic has also brought about the importance of maintaining good hygienic practices both at home and in the healthcare facilities, considering that the virus can be distorted through washing hands with soap regularly and disinfecting surfaces from time to time.