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Financial Statements Review for Physicians
By Dr. David Edward Marcinko; MBA, CMP™
[Publisher-in-Chief]
The Balance Sheet [BS] is one of four financial statements that report a medical practice or healthcare entities financial position in terms of its assets, liabilities, and shareholder/owner equity, at a specified point in time.
The four consolidated statements are: balance sheet, net-income, cash flow and retained earnings.
Included on the Balance Sheet are the following line items:
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Fixed assets include property, buildings, furniture, and equipment.
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Current assets include those that can be converted into cash within a short period of time, typically within a year; such as Accounts Receivable (AR), checking accounts, cash equivalents and investments, money funds, inventory and pre-paid expenses; other long term assets like intangibles (and goodwill).
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Current liabilities and Accounts Payable (AP) are to be paid within the fiscal year, and include short-term debts, salaries and wages, accrued expenses and other notes.
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Short-term liabilities are loans repaid over one year.
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Long-term liabilities are loans repaid over many years.
Assessment
Ownership is shown in the form of retained earnings or medical practice equity and represents the difference between the total assets and total liabilities of the unit.
Working Capital is a key concept in cash flow analysis. Working Capital is the difference between current assets and current liabilities [WC = CA – CL].
An increase in working capital implies (-) cash flow; a decrease implies (+) cash flow.
Cash position, or liquidity, is measured by changes in working capital, not the level of working capital.
Conclusion
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