Financial and Operational Analysis Report: New Life Healthcare

This report provides a detailed analysis of the financial and operational aspects of New Life Healthcare, a company providing private healthcare services in the UK. It begins with an introduction highlighting the importance of business growth and the opportunities within the healthcare sector. The mai...Read More

MANAGING
FINANCE &
OPERATIONS

Contents
MANAGING FINANCE & OPERATIONS...............................................................................1
INTRODUCTION...........................................................................................................................1
MAIN BODY..................................................................................................................................1
a) Evaluation of operational as well as regulatory factors..........................................................1
b. Estimate the Income and Expenditure projections..................................................................5
c. Evaluation of the financial worth of current proposal.............................................................6
d) Conclusion and recommendation............................................................................................8
Recommendation.........................................................................................................................8
REFERENCES..............................................................................................................................10

INTRODUCTION
In today’s modern world, It has become very important to continuously grow and develop
business in order to survive in the market effectively as well as efficiently. There is a rapid
growth in the population and so is the case with healthcare facilities within United Kingdom. The
health of individuals has become major focus for families and thus it has become a big business
opportunities for the companies. New life private Healthcare Plc is a company which is engaged
in the business of providing private health care services to people within the UK. The company
is giving tough competition to the existing players like virgin healthcare in the market and thus it
is expected that business growth will take place and the company will have to expand its
operations. The current report will have a detailed discussion on various factors that are
necessary to enter into the business of private nursing residential care and what resources will be
required, along with the additional cost and profits that the organisation can expect in various
alternatives that are available to it (Mahadevan, 2015). A detailed discussion will be carried out
in this report regarding the cost that will be incurred by the company on various alternative that
are available for the purpose of investing into a new venture.
MAIN BODY
a) Evaluation of operational as well as regulatory factors
For the purpose of entering into residential care market, it is necessary for the company
that right kind of research is done regarding the factors that may have the positive as well as
negative impact on the company and its business decision. An association is comprised of
different tasks and it need to deal with its activities well so it will improve efficiency and also
productivity of the association and will bring about an expansion in general effectiveness of the
association. To manage the activities of association well it is of fundamental significance that
association takes after different standards of tasks The current economic system of United
Kingdom is facing distress due to various reasons, of which Exit of Britain from European Union
is the primary one, it has impacted the level of income of individuals within the country, and
therefore their level of expenditure on healthcare has also reduced to quite an extent (Eskerod
and Huemann, 2013). Thus it is essential that a proper analysis is required to be made of what
will be the benefits of entering into the new sector of private nursing health care. Evaluation of
various operational as well as legal factors can be discussed as follows:
1

Operational Factors
 Cost of Various equipments: It is a very important element of expansion of a business;
the cost that will be incurred on purchase of various equipments for the purpose of
delivering services related to nursing equipment can play a major role in deciding to
make an investment within the business. Equipments can be machines through which
necessary test of patients will be conducted, various other types of machines which are
either directly or indirectly related with the conduction of tests of patients, and provision
of other kinds of services etc. (Peng and Lai, 2012)
 Land and Building Cost: For the purpose of treating patients effectively, a building
needs to be hired or purchased, where all the activities will be performed, for the purpose
of doing this business it is highly essential that building is at a place which is hygienic
and is not a remote place that may cause lower accessibility for patients. The amount that
will be invested by the New Life Healthcare in fixed assets will play a prominent role in
making a decision whether investment needs to be made or not, because if the level of
investment in fixed assets are high then the overall cost my surge and hence, the
organisation will have to revisit its decision (Brown and Bessant, 2013).
 Staffing cost: The cost that will be incurred in hiring right kind of doctors, nurses etc, for
the purpose of serving people of UK. Their admission within the hospital shall be done
after checking their authenticity as well as experience in an effective way, before finally
giving them the very important job of treating people. In medical field as well as
healthcare sector, Staffing cost plays a prominent role and it becomes extremely
important to make sure that adequate staff are available which can be put to work and
other staff is ready for any case of emergency situations that may arise.
 Other Operating cost: There is certain other operating cost as well that have to be paid
effectively, like maintenance of the building, Time to time bonus and incentives to
employees which will act as a further operational cost for the business of the company in
longer run. There are various other operating cost that may incur at any given point of
time within a business and that shall be managed by the company and its capable
managers in order to reduce the overall cost and make necessary profits over longer
period of time (Langabeer, and Helton, 2015).
Legal and Regulatory Factors
2

 Laws: It is necessary to have a proper look of various different types of rules and
regulations that are prevailing in the country regarding healthcare and private residential
nursing, this will give New Life Healthcare Plc an overview as to what will be the
requirements of the law and then accordingly, they can manage as well as frame their
business policies. The responsibility to frame legal laws and to regulate the medical
sector of the United kingdom comes under the purview of NHS, If the company will be
partnered with NHS, in its particular venture, then it will be able to succeed over period
of time going forward (Killen, and et.al., 2012).
 Guidelines and standards: There are various sorts of guidelines that are framed by the
medical regulator NHS for the purpose of effectively managing the medical and
healthcare industry in UK. It is quite important that those guidelines are abided by New
Life Health care and if there are cases of any deviation from such deadline, then those
have to be overcome. Different countries have their own guidelines regarding the private
sector healthcare and thus it becomes a very crucial aspect that those guidelines shall be
abided by the business managers in an effective way, so that Health care can be taken
forward in the long run, which is vital for the overall health of the Nation (Hall ed.,
2012).
Application of Operations Management theory
There are various theories of managing a particular business in an effective manner, these
theories lays down the effective procedure of managing as well as developing the business at
market place. These theories make it possible for the organisation to reduce its extra kind of cost
and infuse higher level of profits within the business (Zangiski, de Lima and da Costa, 2013).
Operations management includes certain obligations. One of those duties is guaranteeing the
business works effectively, both regarding utilizing minimal measure of assets fundamental and
in meeting clients' necessities to the most noteworthy standard monetarily reasonable. Tasks
administration includes dealing with the procedure by which crude materials, work and vitality
are changed over into merchandise and services. Relationship building abilities, imagination,
sound investigation and mechanical learning are exceptionally imperative for achievement in
activities administration. This theory is a wide concept and allows an individual to have a clear
viewpoint that what are the things that are essential for the overall growth and development of a
business organisation. The various theories are discussed as follows:
3

 Lean Theory: The Lean delivering strategy starts from Taiichi Ohno's Toyota Production
System (TPS) that is nearly connected with the Just-In-Time (JIT) standards. Lean is
fundamentally pointed toward the lessening of waste and wasteful aspects inside
procedures over the entire give chain, and are focused on those exercises that expansion
the standard and worth of the product or services for the customer. This theory clearly
states that right kind of procedure shall be applied by the organisation to effectively deal
with customers through low cost structure within the organisation. It aims at reducing the
cost by reducing overall wastages of the firm (Grunig ed., 2013).
 Six Sigma Theory: Six Sigma can be seen as a dealt with and composed rationality for
constant process changes and quality organization which uses change experts and
estimations to gain customer faithfulness, diminish process assortment and achieve
fundamental goal, individuals question the honest to goodness consequences for
affiliations while realizing or applying Six Sigma programs. The creators suggest that Six
Sigma is routinely used to truly reduce process cost and quantifiable essential authority.
New Life Healthcare utilizes these speculations for successfully dealing with its assets
and to get the most ideal result from those. The organization is concentrating on nature of
its services and in addition administrations for this reason it is concentrating more on
powerful organization and management of its activities (Eskerod and Huemann, 2013).
 Reconfigurable Manufacturing: Reconfigurable manufacturing frameworks are
generation frameworks intended to join quickened change in structure, equipment and
programming parts. This enables frameworks to alter quickly to the ability to which they
can precede with generation and how proficiently they work in light of market or inborn
framework changes.
If these theories are effectively applied New Life Healthcare, then it will be able to do
business in a more effective way and will be able to reach more patients along with providing
them affordable healthcare at a much reduced level of cost. Thus it is essential that management
of the organisation follows a proper procedure to implement these policies within the
organisation effectively in the longer run (Pradhananga and Teizer, 2013).
4

b. Estimate the Income and Expenditure projections
NPV: It refers to net present value that a particular project possess after reducing its present
values of cash inflows from it cash out flow. If the ultimate NPV is positive, then the project
shall be accepted, however if the NPV is negative that means that company is not been able
to meet even its cost in the project, thus it is better to shut down the concerned project. It is a
very important concept that makes it easy for a business manager to do business in an
effective way and arrive to conclusion, whether to invest or divest from a particular project.
The NPV Formulae considers the present value of cash flow in the long time. The Net
present value of a project enables an organisation to effectively address different aspect of
cost as well as profits that can be expected at a certain level of cash inflow and cash outflow
(Marcelino-Sádaba, and et.al., 2014).
Payback: If an organisation decides to calculate this ratio, then it will try to figure out that what
will be the time period in which the money that is invested in the project will be paid back to
its owners. The payback period is calculated by dividing the Initial cost of the project with
cash flow after tax. This is an essential concept in the financial decision making thus shall be
calculated before making any such investments over longer period of time (Nielsen and
et.al., 2014).
Income Statement Amount
Revenues:
NPV 4000000
operating incomes 100000
Expenses:
Operating costs 1000000
Cost of building 600000
Equipment lease 500000
Staffing costs 5720000
Building maintenance cost 500000
5

Discount allowed 732000
Net income -4952000
Cost of per bed cost involvement / total beds 9052000/50 181040
Cost of per bed day Cost of per bed / total number of days 181040/365 496
Interpretation:
From the above income statement it has been observed that this foundation is bearing losses due
to their heavy fixed expenses such as operating costs, cost of building, equipment lease, staffing
costs, building maintenance cost and the discount which is allowed to social services. With the
help of this income statement cost of per bed day is calculated. In order to attain the specific aim
of determining cost per bed day, variable and fixed costs are ascertained. With the cost per bed
day of 496, foundation is bearing loss of 4952000. Total number of beds was 50 and total
number of days is considered as 365. Hence, it can be said that current proposal which the board
is seeking for the purpose of entering into the business of Private nursing can turn out to be
negative for the firm in the longer run. The company’s revenue as well as profits has been
reduced to a wide extent, which will pose a threat on even the existence of the organisation in the
longer run. It is quite clear from the above analysis that there is a negative result of all the
activities that will be performed by the organisation. It can be seen from the above analysis of the
numbers that there are various high cost that has lead to higher level of overall cost structure,
Thus profits are also reduced to an extent and has even turned into losses. The company shall
make sure that a proper and effective growth and development can take place in an organisation
through a proper analysis of other alternatives and the level of profits that can be achieved, under
those circumstances.
c. Evaluation of the financial worth of current proposal
PV Ratio: This ratio makes it easy for an organisation to analyse the percentage of variable cost
that is there as compared to the sales of the organisation. If the variable cost is too high that
means that the company is having high operating expenses and those shall be reduced
immediately by paying proper attention to the same. A PV ratio effectively informs an
organisation that what is the level of variable cost as compared to sales and which allows an
6

organisation to take necessary corrective actions for the purpose of bringing it down to a certain
level within the business (Flyvbjerg, 2014).
Break Even Sales: Break Even sales deals are the dollar measure of income at which a business
gains a benefit of zero. This business sum precisely takes care of the hidden settled expenses of a
business, in addition to the greater part of the variable expenses related with the deals. It is
valuable to know the equal the initial investment deals level, with the goal that administration
has a benchmark for the base measure of offers that must be created in each revealing period to
abstain from bringing about misfortunes. For instance, if a business downturn is normal, the
make back the initial investment level can be utilized to pare back settled costs to coordinate the
normal future deals level. Basically when the company will reach a level of sales where the sales
of the company equals the cost that it is incurring, such level is said to be Break Even sales and
thus higher level of profits as well as growth can be achieved effectively, if this ratio is tracked
properly over the long run. Because at this point the company will know exactly, how much sales
it will have to make in order to covers it overall cost that has occurred. The breakeven point can
be calculated on the basis of units and on the basis of amount. Both the measures give a view
point regarding company and its profitability from different point of view (Gilbert and et.al.,
International Business Machines Corp, 2015).
Particulars Formula Calculation
Contribution analyses Contribution/Sales*100 75
Breakeven point Fixed costs/Contribution 2.684
Break even sales Fixed costs/Contribution analyses 10736000
Interpretation:
The evaluation of the current proposal as well as the financial worth of the current project
clearly states that right kind of benefits is not achieved by the organisation after following
current proposal. If the organisation decides to opt this proposal then it may have to face various
kinds of repercussions in the long run. The breakeven point of the current project is quite high,
thus if New Life decides to venture into new market with such a high break even cost, then it
may lead to higher losses for a prolonged period of time. Thus it is quite essential to conduct
business by making a proper analysis of various factors that affects the business and may hinder
7

its growth going forward. The above analysis clearly depicts that company’s breakeven sales will
be quite high and it will have to make extra ordinary efforts to achieve those sales targets, even
in next 3 years.
Thus it can be said that it is extremely difficult for the company to earn profits within
first three years of entering into this project or market. Thus the proposal shall not be selected
and should be revisited with another option of buying building through lease, then after making
all the back calculations, it can be ascertained that, whether the second proposal is good enough
for the organisation in the longer run or not. New life Healthcare shall ensure before investing a
singe penny within the market that, the company’s profits are there or not in operating a
particular project, but under the current scenario, it seems to be difficult that company will be
able to generate profits beyond a specific timeframe in the longer run.
d) Conclusion and recommendation
Conclusion
From the above discussion, one might say that there are different tasks that an assembling
concern is comprise of and it is essential that those activities are overseen well in a viable way
with the goal that profitability can be accomplished and business can be developed. It is similarly
imperative that tasks are done in the most effective way that is available; this would incorporate
less cost and higher benefit. The point of administrator ought to be to cause least conceivable
cost for dealing with the tasks and its parts like stock administration, administration of
provisions, creation and so forth. Alongside appropriate administration of tasks it is very urgent
likewise that when an organization dispatches new undertaking with the end goal of higher
gainfulness, it is additionally surveyed and overseen successfully. It is a piece of other life cycles
and it assumes a vital part in deciding the eventual fate of any business and its development.
There is a requirement for development in these speculations, yet those upgrades should be
possible physically when these are actualized by chiefs in their individual business. The Life
cycle changes likewise with the extent of business, if the business is little it will be extraordinary
and if the business is expansive and are having substantial assets, the existence cycle of the task
will shape appropriately, yet at last the idea will continue as before.
Recommendation
The above case requires to interpret and analyse the data in an effective way for the
purpose of effectively recommending the company that the overall growth and development can
8

be achieved by managing the business in an essential manner. The above proposal that is being
discussed under the case is not profitable for the organisation, as its NPV is not much enough
and at the end the company is loosing money and is not able to break even at least for three
years. Thus the company shall not reach to conclusion for investing in a particular project; it
shall make proper analysis as well as feasibility of the project shall be checked. There is also a
need that proper management of the business is done through expert and reputed staff, instead of
workers who would not have enough idea as to how to deal with people. The organisation shall
not choose this sector or the market for growth and increase its current efficiency as well as
profitability by considering some other investment avenues that are available. Thus it can be
recommended to the company that it shall put on hold, its decision to invest in private nursing
healthcare because it is not certain that profits will be high and expectations of the shareholders
will be able to met.
9

REFERENCES
Books and Journals
Mahadevan, B., 2015. Operations management: Theory and practice. Pearson Education India.
Brown, S. and Bessant, J., 2013. Strategic operations management. Routledge.
Langabeer, J.R. and Helton, J.R., 2015. Health care operations management. Jones & Bartlett
Publishers.
Hall, R. ed., 2012. Handbook of transportation science (Vol. 23). Springer Science & Business
Media.
Grunig, J.E. ed., 2013. Excellence in public relations and communication management.
Routledge.
Eskerod, P. and Huemann, M., 2013. Sustainable development and project stakeholder
management: What standards say. International Journal of Managing Projects in
Business. 6(1). pp.36-50.
Pradhananga, N. and Teizer, J., 2013. Automatic spatio-temporal analysis of construction site
equipment operations using GPS data. Automation in Construction. 29. pp.107-122.
Nielsen, S. and et.al., 2014. Management system, and associated methods and apparatus, for
dispatching tickets, receiving field information, and performing a quality assessment for
underground facility locate and/or marking operations. U.S. Patent 8,626,571.
Flyvbjerg, B., 2014. What you should know about megaprojects and why: An overview. Project
management journal. 45(2). pp.6-19.
Gilbert, Y.S and et.al., International Business Machines Corp, 2015. Case management system
and method for collaborative project teaming. U.S. Patent 9,189,756.
Marcelino-Sádaba, S.,and et.al., 2014. Project risk management methodology for small firms.
International journal of project management.32(2). pp.327-340.
Zangiski, M.A.D.S.G., de Lima, E.P. and da Costa, S.E.G., 2013. Organizational competence
building and development: Contributions to operations management. International
Journal of Production Economics. 144(1). pp.76-89.
Killen, C.P., and et.al., 2012. Advancing project and portfolio management research: Applying
strategic management theories. International Journal of Project Management.
30(5).pp.525-538.
Peng, D.X. and Lai, F., 2012. Using partial least squares in operations management research: A
practical guideline and summary of past research. Journal of Operations Management,
30(6), pp.467-480.
Eskerod, P. and Huemann, M., 2013. Sustainable development and project stakeholder
management: What standards say. International Journal of Managing Projects in
Business, 6(1), pp.36-50.
10