Assignment
Questions
As an aspiring manager you are tasked with creating a report which covers the following topics:
1. Discuss and assess the importance of accounting and finance functions in the operations of a healthcare organization, either in the public or private sector.
2. Within academic literature it is said that the primary objective of a company is maximize the owner’s wealth. Critically discuss why a healthcare organisation is unlikely to pursue a strategy of Shareholder Wealth Maximization.
(note: if your organisations is government owned/funded, they are effectively the majority shareholder)
3. KSA Sovereign Fund is looking to take on a new investment offering private healthcare treatments. The company will evaluate two mutually exclusive projects, whose details are given below. The company’s cost of capital is 9%.
- Calculate the Payback period
- Calculate the Net Present Value (NPV) of both projects
- Calculate the Internal Rate of Return (IRR) of both projects
3b. Critically discuss the merits of each investment appraisal method, then discuss the result of the evaluations you have made of the two projects and advise the company which project should be undertaken
4. Critically evaluate the use of a Balanced Scorecard in your organisations (or a previous organisations you have worked in)
- Outline the Key Strategy (What is the overall goal?)
- Develop a series of metrics based on Financial Performance, Customer, Internal Processes and finally Learning and Growth
- Explain and identify how your Key Performance Indicators (KPIs) will meet the strategy goals
- Evaluate the challenges, discuss the risks of your organisation within the Balanced Scorecard and the challenges to achieving the goals in point 4c.
5. Riyad Hospital Trust is considering an investment into Hospital Information System; it has two choices via leasing or buying the software and equipment.
The purchase price is SAR 1,275,000 and the machine has a 6-year life. If it buys the software Riyad Hospital Trust will need to fund it using capital that costs them 6% per year. Riyad HT estimates maintenance of the system will be SAR 30,000 per annum. Alternatively, the lease payments will be SAR 220,000 per year for 6 years with rentals payable at the start of each year.
- What are the respective present value costs of purchasing the machine or leasing it?
- Consider the theoretical cost of Debt, Preference Shares and Ordinary Shares rank them from most expensive to cheapest.
- Recently one of your company directors has attended a finance conference, on their return the director has decided the company should fund all projects with debt financing as they are ‘always cheaper than equity’. Critically discuss if you agree with this statement.
- Discuss whether the company should raise finance (via any means) if it has a project available with a net present value of SAR 100million.
Assessment Summary and Academic Mentorship Approach
Brief of Assessment Requirements
This assessment required students to develop a comprehensive management report focused on key accounting and finance functions within the healthcare sector, integrating both theoretical knowledge and practical financial analysis. The assessment was divided into five major components:
- Role of Accounting and Finance in Healthcare:
Students needed to explain and evaluate the significance of financial and accounting operations in supporting healthcare management, budgeting, and sustainability. - Wealth Maximization vs. Healthcare Objectives:
Learners were to critically assess why healthcare organizations, especially public or government-funded ones, do not typically pursue a shareholder wealth maximization strategy. - Investment Appraisal Techniques:
The task involved financial evaluation of two mutually exclusive projects through Payback Period, Net Present Value (NPV), and Internal Rate of Return (IRR) calculations, followed by a critical discussion of each method’s strengths and limitations. - Balanced Scorecard Application:
Students were to design and analyze a Balanced Scorecard framework for their organization, identifying key strategic goals, developing measurable KPIs under four perspectives Financial, Customer, Internal Process, and Learning & Growth and evaluating associated risks and challenges. - Financing and Leasing Decisions:
The final section required computation of present value costs for both leasing and purchasing options for hospital information systems, followed by theoretical discussion on the cost of capital and critical analysis of debt vs. equity financing strategies.
Together, these sections tested the student’s ability to integrate financial management principles, strategic planning, and decision-making frameworks within a healthcare management context.