The Financial Enviroment of Healthcare Organizations - Essay Example

The employees of a corporation are its most important and valuable asset since they represent the human capital of a firm. It is imperative for the managerial staff to keep the lines of communication open with the staff at all times (Reiss, 2007). Sharing information with all important stakeholder groups has become common practice in the work environment of the 21st century. Public firms are mandated to file annual and quarterly reports about its financial condition. The purpose of this paper is to analyze the importance of sharing financial information with the employees of a firm.

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 very important. Companies that have too much inventory on hand are at greater risk of inventory obsolesce. A good way to manage inventory is using just-in-time. A just-in-time inventory system only works with the cooperation of all the employees of the firm.

Staffing decisions affect the employees of a company. Promoting from within is a great practice to motivate the staff. Employees should receive information about how much money the company is spending on compensation costs. The total compensation the employees receive should be compared with the net income of the firm to determine if the workers are receiving a fair share of the profits.ReferencesCapella, B. (2008). After downsizing: A case study of a commercial activities competition reorganization.

UMI Dissertation Publishing. Retrieved February 14, 2014 from ProQuest database.Garrison, R., Noreen, E. (2003). Managerial Accounting (10th ed.). Boston: McGraw-Hill Irwin. Reiss, M. (2007). A shift for Samuel? – Agent says the lines of communication open. Boston Globe. Retrieved February 14, 2014 from ProQuest database. Thomason, K. (2014). Are Salaries Fixed or Variable Costs? Retrieved February 14, 2014 from http://www.ehow.com/info_8288303_salaries-fixed-variable-costs.html