Operational and Financial Components for the Strategic Planning Process

Operational and Financial Components for the Strategic Planning Process

Operational Assessment

Inspection of the income statement provides better understanding of the key operations that played vital role in improving business performance and identifying operational areas that appeared to be a business weakness. Trend analysis of the given three years shows that company has improved its strengths by posting 19% increase in the business revenue of 2008, relative to 15.53% (2007) (Hassan, n.d.). Assessment identified success of increasing promotion and advertising activities, as a reason to improving sales turnover. The company reported 22% increase in operational expenses during 2008 (19%: 2007). Moreover, EBT for the year 2008 was improved from 7% increase to 13% increase due to lowering interest expenses and depreciation and amortization (Hassan, n.d.).

Memorial Hospital

Operating Components

2006

2007

% Change

2008

% Change

Revenue

2,973,643 3,435,397

15.53%

4,087,994

19.00%

Operating Expenses

2,340,178 2,786,230

19.06%

3,401,884

22.10%

D & A

180,197 195,651

8.58%

209,469

7.06%

Interest Expense

154,156 145,938

-5.33%

138,477

-5.11%

Interest Income

30,923 46,064

48.96%

60,570

31.49%

EBT

330,035 353,642

7.15%

398,734

12.75%

NI

182,839 227,121

24.22%

255,987

12.71%

Table 1: Operating Performance of Memorial Hospital (Hassan, n.d., p. 406)

However, the company reported lower increase in the net profit due to lowering interest income and increasing operating expenses. In addition to this, slight increase in the profit was also associated with growing proportion of income tax paid by the company. In a nut shell, Memorial Hospital has successfully improved its business operations' efficiency and performance over the span of three years (Hassan, n.d.).

Financial Assessment

Financial ratio analysis of the company during 2007-2008 helps to assess financial health and to predict future outlook of Memorial Hospital. Comparative analysis of current ration shows decline in the liquidity position from 1.46 (2007) to 1.31 (2008) due to increase in the current liabilities by 22.53% (Hassan, n.d.). Moreover, the company has ...