Financial Analysis

[Name of the Institute]

Financial Analysis

Question # 1

Explain the difference between the investor owned health service organizations and non for profit organization?

Answer.

Investor Owned and Non for Profit Health Organization

With some expectations, the investor owned and nonprofit health organizations are almost similar and are organized as co operations (Himmelstein, 1999). The primary differences between the investor owned hospitals and nonprofit health organizations are as follows.

Investor Owned Hospital/ For Profit VS Non Profit Health Organization

Investor owned profit hospitals are also known as the for profit health organizations. The investor owned by the private investors is owned publicly by the stakeholders and also issues the shares of its stock (Sloan , 1983) in order to raise its revenue for the expansion of the activities of the hospital. For Profit or the investor owned hospitals are historically been in the southern part of the United States of America specifically in Taxes and Florida. Nowadays these hospitals have been expanded nationally and purchased often financially distressed facilities or stand alone facilities that are necessary for accessing to the capital in order to expand. However on the basis of the economic conditions, the investor owned or the for profit health organizations will have the better access for the capital as compared with the nonprofit because it expands by issuance of the debt through the bonds that are tax exempt (Friedman, 1988). The nonprofit health organization means this hospital and the facility do not pay the local property tax or the state tax or even the federal income tax as it is considered as the charity. It also has proved positive benefits in the federal guideline and with the state (Comondore, 2009).

Question # 2

What are the major differences in Cost-Volume-Profit (CVP) analysis when conducted in a capitulated environment versus a fee-for-service environment?

Answer.

Cost Volume Profit Analysis in Capititad Environment & Free Service Environment

In a free service world, the revenue per unit will fall because of decrease in the per unit price and thus in the graph the total revenue slope will fall while on the other hand in the capitation the revenue will not changes with the units of the service produced (Cumby, 2013). Thus, the total revenue line is flat which will represent the total prepayment. In the capitates environment, the revenue is fixed as the fixed cost remains the fixed while in the free service world, the revenue will decreases as the per unit price of the offered service falls (Liu, 2012).

Question # 3

Define the goal of cost allocation and explain the differences in the three primary methods of cost allocation?

Answer.

Goal of the Cost Allocation

The goal of the cost allocation is to provide the information required for decision making processes by the firm. The cost allocation reduces the frivolous use of common resources and to encourage the managers for the evaluating efficiency for the internal services provided. It also helps in calculating the full cost of products for the financial reporting purpose and for the determination of the cost based prices (Bhakar, ...