Moreno Medical Center’s Financial Performance

Nowadays, financial analysis monitors the effectiveness and helps the company or organization stay competitive (Sebe-Yeboah & Mensah, 2014). In the context of this essay, it is vital to understand the significance of different ratios when interpreting the firm’s operations by using an example of Moreno Medical Center and its financial spreadsheets and indicators. Alternatively, this analysis will also assist in developing various tactics, which will help interpret the results and design strategies to enhance company’s efficiency and optimize its financial performance. In the end, the benefits of benchmarking are determined with the assistance of examples of the compliance of the depicted KPIs and industry standards while identifying the benefits.

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Analysis of Variances

In the first place, it is critical to conduct the analysis of the financial ratios of Moreno Medical Center. Consequently, Figure 1 depicts the primary results and compares them with the average standards in the industry.

Ratio Moreno Medical Center Industry Standards (or Average Value)
Quick ratio 4.6 3.2
Current ratio 5.4 2.3
Total margin 0.15% 3%
ROE 1% 7.4%

Table 1. Ratio analysis (Moreno Medical Center: Balance sheet, 2013; Moreno Medical Center: Interim statement of income, 2013; Moreno Medical Center: Statement of cash flows, 2013; Sheps, 2015).

The current ratio measures whether the company can cover its liabilities and decrease the number of the current debt (Delen, Kuzey, & Uyar, 2013). It identifies firm’s liquidity, and having the value over one signifies growth (Delen et al., 2013). As for Moreno Medical Center, it has a higher rate than the average trends in the industry, but it does not guarantee that the organization has its profits maximized. In turn, the quick ratio accesses the organizational liquidity in short-run while paying vehement attention only to the assets of the company, which can be converted into cash rapidly (Delen et al., 2013). In this instance, the value greater than one implies that the firm complies with widely accepted financial principles of liquidity. In this case, Moreno exceeds the industrial standards, and it signifies that the company has a well-balanced flow of cash.

Nonetheless, despite high values in liquidity ratios, the total margin (1%) and ROE (1%) tend to have low rates. In this case, the total margin is the primary KPI, which is utilized to evaluate company’s profitability (Delen et al., 2013). In turn, ROE depicts the actual return of the overall revenues on the financial resources invested by the shareholders of the company (Delen et al., 2013). Speaking of Moreno Medical Center, the analysis of the results reveals that the firm has high liquidity rates but low profitability percentages. In this instance, Figure 1 depicts that the company had unstable net income during 2013, as it experienced major fluctuations, which had an adverse impact on the overall profitability of the company. Possible reasons for the existent gap between liquidity and profitability may be referred to the insufficient planning and budgeting and ineffective distribution of the working capital (Bolek, 2013).

Net income values in 2013
Figure 1. Net income values in 2013 (Moreno Medical Center: Interim statement of income, 2013).

Based on the analyses conducted above, computing actual costs variances and comparing them with the budgeting plan could be viewed as the next step. In this case, it will reveal the gaps in the budgeting processes of the firm and help design the strategy to improve the effectiveness of financial planning. Table 2 presents a comparison of the selected values. Manually computed variance of costs indicates that the majority of the projections could be viewed as correct. Nonetheless, the statements of the expenditure such as the expenses on suppliers (-1%) and depreciation (-20%) were underestimated. This mistake in projections created confusion in cash flow while questioning the effectiveness of the selected budgeting techniques and priorities. This matter could be viewed as a primary reason for a low return on investment and the inability of the company to meet organizational standards and median values.

Budgeted Cost ($) Actual Cost ($) Variance ($) Variance (%) Variance (Budgeting Plan)
Salaries 220553 220752 -199 0% 0%
Suppliers 73487 74587 -1100 -1% 1%
Physicians 110277 110376 -99 0% 0%
Utilities 1222 1200 22 0% -2%
Other 1838 1840 -2 0% 0%
Depreciation 29946 36036 -6090 -20% 20%
Interest 3705 3708 -3 0% 0%
Provision 14721 13797 924 6% -6%

Table 2. Variance comparison (Moreno Medical Center: Operating budget projections, 2013; Moreno Medical Center: Operating variance report, 2013).

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Tactics to Align Actual Results to Budget

To minimize the occurrence of the similar mistakes in future, the company can use various techniques to ensure that the actual results meet the budgeting projections. In the first place, one of the potential solutions, which will have a positive impact on the profitability of the company is focusing on the optimization of the revenues. Nowadays, the employees are the vital contributors to the overall financial prosperity and stability of the business (Elnaga & Emran, 2013).

Consequently, investing in their training and quality control systems will generate a faster return on investment and assist in increasing the operating income (Elnaga & Emran, 2013). Simultaneously, changing the company’s perception of the significance of the patient-centered approach will have a beneficial influence on building trusting relationships with the customers and increase their retention (Epstain & Street, 2011). Overall, a combination of these techniques will have an advantageous impact on the performance of the medical center. Simultaneously, maximizing profits will increase the amount of available budget for the investment in R&D, training, and innovation.

Another strategy, which can help meet the estimated expenses, is reviewing the contracts with the suppliers. In this instance, the executives of the firm can decrease the associated costs while assessing the alternatives available in the market. This tactic will not only help minimize the variance between the actual and projected costs but also increase the company’s flexibility to the market changes. Additionally, the medical center can also review the principles of its budgeting and decision-making frameworks. For example, it can reconsider and redesign its financial methods to calculate depreciation and amortization, as it was the state of expenditure with the major variance. Despite a unique nature of the proposed tactics, they have to be applied simultaneously to enhance budgeting strategy and firm’s financial performance.

Benefits of Benchmarking

The case of Moreno Medical Center revealed that the role of benchmarking cannot be underestimated, as it is one of the major instruments to monitor the firm’s progress. In spite of having issues with profitability, the case company could be viewed as a bright example since it was able to take advantage of benchmarking and increase its liquidity ratios. This matter signifies that Moreno Medical Center can remain its market share while covering its liabilities.

Alternatively, benchmarking assists in improving the company’s competitive edge and quality standards, determining a direction, and taking advantage of industry tendencies. In the past, this approach helped Xerox to decrease its production costs and maximize its processes (Ettorchi-Tardy, Levif, & Michel, 2012). Alternatively, this tactic was actively employed in France to encourage innovation and cultivate company’s growth in the medical sector (Ettorchi-Tardy et al., 2012). Consequently, Moreno Medical Center has to take advantage of this strategy, as it will help improve its budgeting processes, increase its revenues, and enlarge its market share.


Bolek, M. (2013). Profitability as a liquidity and risks function basing on the new connect market in Poland. European Scientific Journal, 9(28), 1857-1872.

Delen, D., Kuzey, C., & Uyar, A. (2013). Measuring firm performance using financial ratios: A decision-tree approach. Expert Systems with Applications, 40(1), 3970-3983.

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Elnaga, A., & Emran, A. (2013). The effect of training on employee performance. European Journal of Business and Management, 5(4), 137-148.

Epstain, R., & Street, R. (2011). The values and value of patient-centered care. Annals of Family Medicine, 9(2), 100-103.

Ettorchi-Tardy, A., Levif, M., & Michel, P. (2012). Benchmarking: A method for continuous quality improvement in health. Healthcare Policy, 7(4), 101-119.

Moreno Medical Center: Balance sheet. (2013). Web.

Moreno Medical Center: Interim statement of income. (2013). Web.

Moreno Medical Center: Operating budget projections. (2013). Web.

Moreno Medical Center: Operating variance report. (2013). Web.

Moreno Medical Center: Statement of cash flows. (2013). Web.

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Sebe-Yeboah, G., & Mensah, C. (2014). A critical analysis of financial performance of agricultural development bank (ADB, Ghana). European Journal of Accounting Auditing and Finance Research, 2(1), 1-23.

Sheps, C. (2015). A primer on ratio analysis and CAH financial indicators report. Web.

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