Financial Analysis: Managing Finance in Healthcare (NZ Blood Service)

This report provides a comprehensive analysis of financial management within the New Zealand Blood Service (NZBS). It begins by identifying tangible and intangible resources, followed by a PESTLE analysis to evaluate external factors impacting the organization. The report then examines the importance of financial information for both internal and external stakeholders, differentiating between financial and management accounting. It delves into cost accounting, including fixed and variable costs, material and labor costs, and funding sources. The core of the report focuses on analyzing financial statements, particularly profitability and liquidity ratios, with interpretations and notes on accounts. The analysis covers trends in net profit margin, return on shareholders’ equity, return on assets, and the current ratio. This report provides a detailed financial overview of the NZBS, highlighting its financial performance and management strategies.

Running Head: MANAGING FINANCE IN HEALTHCARE
MANAGING FINANCE IN HEALTHCARE
Name of the Student
Name of the University
Author Note

1
MANAGING FINANCE IN HEALTHCARE
Table of Contents
Answer to Question 1.................................................................................................................2
Answer to question 2..................................................................................................................4
Answer to Question 3.................................................................................................................8
References................................................................................................................................18
Appendix..................................................................................................................................19

2
MANAGING FINANCE IN HEALTHCARE
Answer to Question 1
Tangible and Intangible resources New Zealand Blood Service (NZBS) organisation are:
 Tangible- Infrastructure is one of the tangible rsources where the company has
invested in order to do a valuable standard of service in the future. Machines like
apheresis machines are also important tangible sources to collect plasma & platelets
donors for allowing the donors to donor more.
 Intangible sources- Staff skills in one important intangible asset of the organisation.
NZBS staffs are continuously focused on doing improvement in developing solution.
Other intangible assets is brand recognition. Due to this the organisation has number
of projects for further improvement of people safety in the organisation.
PESTLE Analysis
This strategic framework will help to evaluate the external environment of NZBS
based on its opportunity and threats.
 Political factors- If we look towards the political factors, it can be seen that the
funding of organisation comes from taxpayers and DHBS. Hence, for providing better
value to the products, the organisation needs to follow the tax payers. Tax payers pay
the tax depends upon the tax policy of the country. Any change in the tax policy will
affect the country economy and will simultaneously affect the business. The
organisation also has agency in various countries in world like Ireland, Malaysia,
Hong Kong and many more. Any restrictions from this trading countries will affect
the business operations.
 Economic factors- The service performance of the company depends on the growth
rate of the output. That means the total number of patients performed by the
organisation. If any change in the country’s inflation policy or growth rates will

3
MANAGING FINANCE IN HEALTHCARE
lowers down the company’s output measure (Achinas et al., 2019). The growth rate of
output is also depends on the population growth of the country. Hence, variation in
population, inflation rates and growth rates can affect the business system of the
organisation. This can be changed by the central banks of the government agencies of
the country. The company has to do its business by meeting the government
expectations related to the health care. Also if the interest rate changes then the
business may have to refinance its debts to continue the business operations.
 Social factors- New Zealand Blood Service is focused in encouraging the youths to
do more donations. The young generations may come from different cultural groups
or belong to different work groups. This means that if cultural aspects and perceptions
of this young generations changes then it may affect the business. This demographic
feature may impact the business. The growth rates in population in the country will
also affect the business.
 Technological factors- NZBS is planning to do research and development inside its
business to develop the products. It is focusing on upgrading the blood management
system in its business system. In case of any failure in this technology can affect the
business. This will affect the overall economy of the business. It may also be harmful
for their operations.
 Environmental factors- The clinical program may affect due to change in any climatic
condition of the country will affect the business operations. In case of any natural
disaster in the country, it will also affect the business. This un-exepectancy conditions
can affect the business (Rastogi & Trivedi, 2016).
 Legal factors- The organisation is compiled with following the regulation established
by Ministry of Health. Any change in the regulations by Ministry of Heath guidelines
will affect the business. Any change in policies by the country government related to

4
MANAGING FINANCE IN HEALTHCARE
labour laws, intellectual property, license and other industry regulation. This will
affect the business and may force the business to shut down.
Organisational vision- The New Zealand Blood Service vision statement is focused on
doing excellence in its business operations in order to meet the needs of the patients, staffs,
donors and the entire community. This means that the vision statement is focused on valuing
the external environment of the business.
Organisational mission- The mission statement of the organisation is committed to
become a good employer and provide a great place for them to work and grow themselves in
the business. The company is focused on engaging workforce to the work to attain the
organisational purpose. This means that the organisation is focused on developing the
employer’s skills and also helps the community and external environment.
Organisational objectives- The primary objectives of this organisation is to provide a
core activity in the business and provides a higher quality of products & services to the
patients and the people. This objectives of the business says that the organisation is focused
on providing values to the external environment of the business. This justifies the
commitment of organisational strategy to its external environment.
Answer to question 2
a. NZBS is focused on providing blood & tissue products that will help the patients to
meet it health needs. It is very important for these patients to understand whether the
company products can meet their needs. The financial statement provides the financial
information of the company related to its business transactions in every reporting
period.
The importance of financial information for External stakeholders are:

5
MANAGING FINANCE IN HEALTHCARE
 Consumers- The patients and the community people are interested to get the
knowledge related to the company products to ensure better health benefits from the
organisations. They are also interested in finding out the profitability of the business
because the growth in business will provide customer service at a lower price.
 Suppliers- The organisation is committed to purchase consumables and inventory
from the suppliers. The suppliers are interested to ensure that their payments are not
due. They also compare financial information with other companies to find more
supply opportunities.
The importance of financial information to the internal stakeholders are:
 Shareholders- The shareholders are interested to determine whether their investments
in the business are valuable or not. They compare their investment benefits from their
financial information with organisation.
 Employees- Employees are interested in knowing that whether their job is secured in
the NZBS organisation. They are also interested to know the fairness of their salaries
& wages with respect to the organisational earnings.
b. Comparison
Financial Accounting Management Accounting
 This accounting system is the
integration of accounting related
information into the company
financial system.
 This is reported as the entire result
of the New Zealand Blood Services
 This type of accounting system
involves all the internal process of
the business that account together to
do business transactions.
 It is reported as the during the
business operations. It gives more
detailed information related to

6
MANAGING FINANCE IN HEALTHCARE
 This indicates the efficiency of
NZBS operations (Weetman, 2019).
 Examples- the Company follows
international accounting standards
and follows its obligations to report
the annual statements of the business
in financial statements.
business revenues, patients,
company product & services.
 It represents the problems in the
reporting system and fix them.
 Example- NZBS is focused on
following cost accounting process
like cost control technique to do
efficient manufacturing &
distribution of the company’s
product.
c. Types of cost
 Fixed cost- The cost related to fixed inputs of NZBS. This is the cost related to the
infrastructure of the organisation. The business prioritise in doing investments in its
infrastructure from many years to do its business. Cost related to property, plant and
equipment of the business is also included in fixed cost. This cost is used to capital
projects of the organisation. This cost is generally fixed.
 Variable cost- Cost of raw materials and inventories that are recognised as cost from
the suppliers is the variable cost of the business. Cost related to laboratory equipments
are also continuously changing as the volume of production changes. Growing
business requires new technologies in the business, hence business is replacing new
equipments in their business that helps the team to associate in the business activities
(OConnor et al., 2016).

7
MANAGING FINANCE IN HEALTHCARE
 Material cost- NZBS procures materials like consumables and inventories from their
suppliers in their production process. This will help them to successfully do the
production process.
 Labour cost- NZBS is doing expenses on providing benefits to the employees. This
includes cost related to employee benefit scheme like Work Perks to provide their
employees certain discounts on the company products and services.
d. New Zealand central and local government mainly provides funds from public
taxation system. Health service fund comes from the Ministry of Health services,
where it makes plans to provide health services to the hospitals. Central government
supports in providing all the service requirements to the health centres starting from
community services to the purchasing services to the hospitals. Funds raised from
these centres are secured and are not risky for the business. The hospitals who get
funded from the government will also get free outpatient and inpatient treatment. New
Zealand Blood Services has received funds has borrowed $8.3 million of funds in its
business. The company has generated revenues at an amount of $102.5 million to
District Health Boards.
e. Ministry of Health funding is a public funding group that supports the hospitals in
providing health related services like maternity services, clinical education services
and many more. It is a public service department in New Zealand. The business units
of Ministry of Health service includes corporate services, clinical leadership, National
health board, policy, and Maori health & Sector implementation.
Equity funding sources- Retained Earnings is the type of equity funding used by the
organisation. NZBS is engaged in issuing various bonus shares to its shareholders to retain
the earnings and finance the business.

8
MANAGING FINANCE IN HEALTHCARE
Third party funding source- NHBS source its short term funding for its payroll and
short term needs from funding from uncommitted facility with a specific terms and
conditions. This type of funding is used by the organisation for temporary purpose.
Answer to Question 3
(b)
Profitability Ratios:
 Trend- the Net Profit Margin was 9.05 in FY 2018 and decreased to 3.27 in FY 2019.
Interpretation- A decrease in Net profit margin indicates that NHBS has not
effectively managed the business operations. This means the cost of doing business
operations increases. This has lowered the net profit margin.
Notes to accounts- Expenses is related to cost of consumable & changes in inventory
which was $34,455thousand in year 2018 and increased to $39676 thousand in 2019.
Employee benefit expenses has also increased to $36,823 thousand in 2019, which was
$34,013 in FY 2018.
 Trend-Return on shareholders’ equity was 0.59 in FY 2018 and decreased to 0.22 in
FY 2019.
Interpretation- This indicates that, the company is not efficient in generating its profit.

9
MANAGING FINANCE IN HEALTHCARE
Notes to accounts- There are no changes in shareholders’ equity as compared to previous
year. But the net income has decreased to $3447 thousand in 2019, which was $9,252
thousand in 2018. This may be the reason for decrease in shareholders’ equity in 2019.
 Trend- Return on assets was 0.09 in FY 2018 and decreased to 0.04 in FY 2019.
Interpretation- This decrease in ROA indicates that the company has not generated
enough income from its assets. The business may have invested more of its amount in its
capital projects.
Notes to accounts- It can be seen that the net income is $3,447 thousand in FY 2019
which was $9,252 thousand in FY 2019 and also the average total assets has been decreased
to $84,715 thousand to $97,896 thousand in the FY 2019. Net income is the amount of net
earnings of the business that has been found by deducting the company’s expenses from its
gross revenue.
Liquidity Ratios:
 Trend- The current ratio was 3.41 in FY 2018 and decreased to 3.28 in FY 2019.
Interpretation- There is a decrease in current ratio, but the company has maintained its
ideal ratio of 2:1. This indicates that the company is able to pay its short term obligations.
The company has enough capacity to pay its obligations.

10
MANAGING FINANCE IN HEALTHCARE
Notes to accounts- Current assets includes cash & cash equivalents from cash at hands
and cash at banks (NZBS Performance. 2020). This has a maturity of less than three months.
Trade from other receivables are from sundry receivables and prepayments. Inventories are
the raw materials from frozen plasma, work in progress, fresh components and consumables.
Current liabilities includes employee benefits from accrued salaries & wages, long service
leaves and gratitude’s. It also includes the borrowings from financial lease and credit facility.
 Trend- Operating cash flow ratiowas 0.58 in the FY 2018 and then decreased to 0.43
in the FY 2019.
Interpretation- The decrease in cash flow operations indicates that the balance of asset
has increased.
Notes to account- Cash from operations has generated from movements in working
capital of the business. This includes trade & other receivables, cash flow from inventories,
employee benefits, cash flow from revaluation of derivative financial instruments and cash
flow from trade and other payables.
 Trend- Net-working capital ratio was 0.56 in FY 2018 and decreased to 0.52 in FY
2019
Interpretation- This indicates that the company is using its cash to invest in its
buildings and hence its current assets has increased in 2019 as compared to the previous year
and there is no change in the current liabilities.
Notes to account- The cash flow from capital expenditure was only $5,021 thousand
in FY 2018 and then increased to $6,348 thousand in the FY 2019. Hence, more cash
investment is done in the capital expenditure in FY 2019.
Efficiency Ratios:

11
MANAGING FINANCE IN HEALTHCARE
 Trend- Total assets turnover ratio was 1.04 in FY 2018 and then increased to 1.25 in
FY 2019.
Interpretation- The increase in asset turnover ratio indicates that the company is
efficiently managing its assets to generating its sales. Hence, the efficiency & productivity of
the company is good.
Notes to account- The total assets includes all the current assets and non-current
assets of the business. Current assets includes cash & cash equivalents, trade & other
receivables, inventory and non-current assets includes property, plant and equipment and
intangible assets.
 Trend- Inventory turnover Ratio was 3.87 in FY 2018 and then increased to 6.09 in
FY 2019.
Interpretation- Increase in inventory turnover ratio indicates that the company
inventories are least liquid. This can also mean that the company is unable to manage its
inventory.
Notes to accounts- The inventories include raw materials from fresh frozen Plasma,
work in progress from fresh frozen plasma, consumables and other fresh components that are
used as a security for managing the company liabilities.
 Trend- Accounts receivables turnover ratio was 0.58 in FY 2018 and then decreases to
0.11 in FY 2019.