Summary Cardinal Health Inc. (NYSE:CAH) ranks amongst the industry leaders in the medical supply market. However, recent financial performance suggests challenges for Cardinal Health. In addition to the recently passed Patient Care and Affordability Act, Cardinal Heath underwent significant changes in fiscal 2010. An analysis of several key financial ratios offers mixed results. Highlighting these changes was the divesture of Care Fusion, Inc. and the acquisition of pharmaceutical companies bolstering Cardinal's portfolio. During difficult economic times, Cardinal Health was able to grow revenues 3%, increase inventory turns, and maintain an industry leading cash conversion cycle. However, profit margins continue to decline amid declining earnings. Efficiency ratios indicate how well a company is using its assets. This efficient use of inventory leads to resourceful cash conversion especially significant in a low margin industry. The favorable use of inventory benefits Cardinal Health as they face certain pricing pressure in 2011. Cardinal Health continues to rank among the industry leaders of the medical supply industry with an inventory turn ratio of 14.0 up from 13.5 in fiscal year 2009 (financial.morningstar.com). In comparison, competitors McKesson Corporation's 2009 inventory turns were 11.5, while AmerisourceBergen inventory turns were 14.8. An inventory to sales ratio of 6.5 and an asset turnover ratio of 4.4 further supports the effective use of inventory and assets as compared to major competitors (advfn.com). Adding to the efficiency of cash use, Cardinal Health maintains a receivable turnover rate of 18.2 in fiscal year 2010 down only slightly from 18.7 in 2009 (advfn.com). Compared with their closest competito... ... middle of paper ... ...emographics, and additional insured people bode well for the future of Cardinal Health. Controlling costs and bolstering sales of high margin product will allow Cardinal Health to increase profits and grow shareholder return. Works Cited Advfn.com. Retrieved December 1, 2010 from http://www.advfn.com/p.php?pid=financials&btn=s_ok&mode=company_data&symbol=NYSE%3Aomi Financials.Morningstar.com. Retrieved December 2, 210 from http://financials.morningstar.com/ratios/r.html?t=MCK Mueller, J. (2010). How Well Do You Use Cash Cardinal Health? Retrieved December 1, 2010 from http://www.fool.com/investing/general/2010/08/23/how-well-do-you-use-cash-cardinal-health.aspx Ross, S., Westerfield, R., & Jordan, B. (2010). Fundamentals of Corporate Finance. New York: McGraw Hill. Yahoo.com. Retrieved December 3, 2010 from http://finance.yahoo.com/q/ks?s=CAH+Key+Statistics
In addition to this business plan, we must also address the financial issues plaguing this organization. To illustrate some of these issues lets look at some of the trends here at OCB and within our Industry: For example, OCB’s clinic operations profitability in 1990 was 60%, and now in 1996 our profitability is only 37%, which is down 23 percentage points! We can blame some of this on rising costs of overhead, consumables, etc, however this is happening as the industry as a whole is growing 5% annually, and as our customer base, largely senior citizens, population is growing at almost 1% as year. We should be capitalizing on these industry trends, however, as you all know, not all the trends work in our favor. For example, our lifeblood, the Insurance company’s managed care organizations, and government healthcare reimbursement programs shows a downward trend of allowable payments for our services (DRGs) For example in 1995 the DRG price of ...
First, let us analyze General Practice Affiliates’ current financial position. The income and expenses report shows a net revenue of $230,250. The net revenue is obtained after expenses, including taxes, of the company have been subtracted from revenue (Paterson, 2014, p. 124). The balance sheet shows a $306,180 in retained earnings. Retained earnings represent stakeholders’ equity (Paterson, 2014, p. 128). Retained earnings are usually invested back in the form of inventory or debt payments (Albrecht, Stice, Stice , & Swain, 2008). General Practice Affiliates’ cash flow analysis shows that the practice invests in new equipment. However, General Practice Affiliates mainly used cash during 2012. The main source of cash from operations came from depreciation expense, which is not a reliable source of funding (Paterson, 2014, p. 130). Accounts receivable increased by $50,000, while accounts payable only increased by $10,000. In addition, cash flow analysis shows a balance sheet data that is affected by future transactions (Paterson, 2014, p. 128). General Practice Affiliates choose to stretch the time to pay suppliers instead of paying its bills. ...
It would be an awesome day in history if the healthcare industry could mimic restaurant chains business practice of combining quality control, cost control, and innovation. Even though it’s a great gesture from a patient’s perspective, there is no way that healthcare could even come close to such models of restaurant business practices. Why is that? Well, a restaurant is more predictable than any health care sector. First, restaurants are able to plan and coordinate their business practice to meet the needs of their customers. Secondly, they can control inventory and certify quality meals at an affordable price. Additionally, they can predict how many customers will
Berk, J., & DeMarzo, P. (2011). Corporate finance: The core, second edition. (2nd ed.). Boston, MA: Prentice Hall.
Minimizing or completely ridding the United States healthcare system of the administrative waste is just the tip of the iceberg when it comes to waste in healthcare spending. The good news is that this is a problem that more and more people are becoming aware of, so forward-thinking practitioners and health advocates are already proposing solutions. Once the changes begin to gain some traction and savings start to show, we will likely see greater patient satisfaction and lower insurance premiums, which will create a trickle-down effect benefiting anyone who does business in the healthcare industry, from the patient to the insurance companies.
HCA, after following a conservative financial policy since its establishment, has entered the new decade preparing to make some changes in order to realign their financial strategy and capital structure. Since establishment, HCA has often been used as a measure for the entire proprietary hospital industry. Is it now time for the market to realign their expectations for the industry as a whole? HCA has target goals which need to be met in order to accomplish milestones in the future. The problem arises as to which area holds priority to the company. HCA must decide how the key components of their financial strategy and policy should my approached in order to meet their future goals.
When assessing where the industry will go over the next ten years, there is one area that stands out. Government involvement in healthcare has become a major player in how this industry is changing. New regulations are being introduced at a rapid rate and have pushed hospitals into constant change management (Arab Kash, Spaulding, Johnson, & Gamm, 2014).
...and his vision in successfully transforming the medical center to a tertiary care facility. However, in 2008 under Ron Henderson, the medical center expenses began to skyrocket and revenues failed to keep up. Also, a hospital census indicated that, on average, Medicare patients consisted of 58% and Medicaid patients consisted of 18% which caused the medical center to suffer from reductions in reimbursements. Although noted by solid evidence that utilization was experiencing a steep decline, Mr. Henderson added 127 new positions to the medical center. In 2009, Mr. Henderson was fired after the board of trustees realized that this financial bind of an $8.6 million deficit was caused by Mr. Henderson. In order for the new CEO, Richard Reynolds, to succeed at his new job title, he must create a benchmarking process adopting certain goals to remain a worthy competitor.
The rapid growth of managed care is the response to limited financial resources and the demand for healthcare services to be affordable. Economic viability is a crucial aspect of health care. Managed care plans were developed to provided health care services, but also to be a method to collect payment for services. There are different types of managed care plans. For example, health maintenance organization (HMO), preferred provider organization (PPO), and point-of-service (POS) plans. For brevity of this paper the HMO managed care system will be discussed along with the relevance of the role of the advance practitioner practicing in HMO setting.
The inventory turnover decreased from 3.8 to 3.59. This is explained by the higher increase in the average inventory (37%) than the increase in cost of sales (29%) during 2005. This means that the rate at which inventory is sold is dropping
Competitive advantage matters greatly to those responsible for the management of healthcare institutions. Together with rapidly escalating healthcare costs, increasingly complex medical technologies, and growing regulatory and legal pressures, healthcare organizations face a critical need to improve the quality of care at reduced costs (Cu...
Brealey, Richard A., Marcus, Alan J., Myers, Stewart C. 1999, Fundamentals of Corporate Finance, 2nd edn, Craig S. Beytien, USA.
Organizations use financial statements and ratio analysis assess financial performance viability. The ratio analysis are used to identify trends and to perform organizational comparison (financial) with other companies within same industry. Ratio analysis, using data reported on the financial statements, are divided into five major categories: common size, liquidity, solvency, efficiency, and profitability. This paper will assess the financial stability of John Hopkins Hospital (JHH) using the five ratio analysis.
... Capital, Corporation Finance and the Theory of Investment", The American Economic Review, vol. 48, no. 3, pp. 261-297.
Block, S. B., & Hirt, G. A. (2005). Foundations of financial management. (11th ed.). New York: McGraw-Hill.