The Financial Enviroment of Healthcare Organizations Essay

The Financial Enviroment of Healthcare Organizations - Essay Example Sharing financial information with the employees of a business should be done by corporations even if they are not required do so such as private firms. A lot of different aspects of the financial performance of the firm should be released. The four major financial statements of a company are the income statement, balance sheet, statement of retained earnings, and the statement of cash flow (Garrison & Noreen, 2002). These statements are prepared upon completion of the accounting cycle. An employee of the firm can perform an evaluation of the financial performance of the company using ratio analysis if he is given the financial statements of the firm. The five categories of ratio analysis are liquidity, asset turnover, profitability, market, and financial leverage. Analyzing the cost structure and expenses of a firm is important for an employee. Companies whose cost structures are too high are at risk of downsizing or closing its facilities (Capella, 2008). The income statement shows the expense accounts of an organization. Profits are obtained by subtracting total expenses from the revenues of a firm. Costs are classified as fixed or variable costs. Fixed costs do not change over time, while variable costs change as a company increases or decreases production output (Thomason, 2014). An important accounting metric that stakeholder groups such as employees need to understand and be informed about is the breakeven point. The breakeven point is the amount of sales that a company needs to generate to cover all its fixed and variable costs. Profit at the breakeven point is cero. The formula to calculate the breakeven point in units sold is fixed expenses divided by unit contribution margin. Unit contribution margin is calculated dividing sales price minus variable cost per unit. The employees must know whether its company is breaking even because the solvency of the firm is dependent on it. Controlling the inventory of a business is