One of the best ways to control the activity of the organization is to have a balance shit as a way of monitoring a company from the financial and tax points of view. A balance sheet is a financial statement that shows the financial position of a business or an organization at a given date. It shows the assets, equity, and liabilities of the business. The assets and liabilities are further classified as current and noncurrent assets or liabilities (Couchman, 2008). A balance sheet is normally depended upon by creditors and lenders who are interested in the viability of the business as it assists to show the going concern of the entity. The development of the market relations extends the capabilities of the financial statements in the direction of the market-oriented. The purpose of this is to provide data to the users who are interested in it and which is necessary for taking the appropriate financial decisions. Trinity hospital balance sheet as of the end of 2011
With expansionary plans, expenditure is bound to increase and the number of employees must increase to absorb the increased demand for services (Besley & Brigham, 2008). According to the balance sheet, it can be seen that there is a likelihood that the hospital liability would increase because of the delay in paying their debt. The hospital operating costs will increase because of the increased number of activities that will be undertaken by the hospital during the expansionary process. On the part of the revenue sector, the hospital should expect an increase in revenues. After the completion of the construction of the cancer wing, the hospital should be prepared to increase the number of doctors and nurses who will attend to the patients. This will lead to an increase in operating expenses and costs (Toten, 2006). In their planning, the hospital administration should also expect to incur other expenses in the acquisition of cancer equipment and drugs. It will be thus reasonable for the hospital administration to expect a small profit margin in the first five years because of the construction and expansion cost. After the completion of the expansion program, the hospital financial forecast will show booming performance. A large number of patients the hospital will expect to admit for treatment will cause this. The revenues to be collected will double after the expansion costs are completed. Because of the increase in assets after the construction of the cancer wing, depreciation cost will increase if the financial statements have to reflect the true and fair view (Couchman, 2008). The remittance to the pension plan would also increase if new Trinity hospital employees were recruited to serve in the cancer wing. The hospital might also incur increased expenses in the remuneration of its employees, as there will be a need to employ qualified staff to handle the complex operations and the many departments (Toten, 2006).
In conclusion, financial planning is important for the success of an organization as it shows the future financial commitments and revenues expected. An organization, which fails to accurately focus the future financial performance, might be faced with operational problems arising from financial distress.
Reference List
Besley, S., & Brigham, E. (2008). Principles of Finance. Mason: Cengage Learning. Couchman, C. B. (2008). The Balance-sheet:its Preparation, Content and Interpretation. The Journal of accountancy.
Toten, M. (2006). Financial Planning. Career FAQs.