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Overview
The purpose of this assignment is to familiarize you with financial statements, the need to align the financials and the strategic direction of the firm, and the process of performing horizontal and vertical analyses of a company’s balance sheets and income statements.
You will be provided with a scenario and a variances analysis. You will use the information in both to create a memo in which you demonstrate your audit financial statements and expenditures based on organizational priorities.
Instructions
Scenario
You’re a healthcare administration fellow at the prestigious Stanford Healthcare. You have been rotating through the various departments over the past nine months and now you have the honor of working under the mentorship of Chief Financial Officer Linda Hoff.
Stanford Medicine includes Stanford Healthcare, Stanford Children’s Hospital, and Lucile Packard Children’s Hospital Stanford. This organization uses an integrated approach to strategic planning, which incorporates jointly agreed-upon strategic priorities from its various entities. It also ensures a high degree of congruence in strategic focus by each entity.
Before outlining the strategic priorities for Stanford Medicine, it is important to note that a firm’s directional strategy comprises three discrete yet interwoven components: vision, mission, and goals (or, in this case, priorities). Armed with this knowledge, you have familiarized yourself with the vision, mission, and priorities of Stanford Medicine. Below is what you found.
When examining a company’s financials, it is prudent to keep the directional strategy of the company in mind. After all, in order to advance many strategic priorities, which include fulfilling the mission and positioning the organization to achieve its vision for the future, proper management of the firm’s scarce resources is vital. Failure to properly manage the financial performance of the organization can compromise the company’s ability to maintain a competitive advantage in the marketplace.
Our Vision
Precision Health: Predict. Prevent. Cure. Precisely.
We will heal humanity through science and compassion by leading the biomedical revolution in precision health.
Our Mission
Improving Human Health Through Discovery and Care.
Through innovative discovery and the translation of new knowledge, Stanford Medicine improves human health locally and globally. We serve our community by providing outstanding and compassionate care. We inspire and prepare the future leaders of science and medicine.
Strategic Priorities
A collaborative endeavor involving the entire community, the Stanford Medicine integrated strategic planning process yielded a framework that is human-centered and discovery-led, focused on three overarching priorities for our enterprise.
By enhancing our strengths and achieving our goals in these priority areas, we will amplify our preeminence and remain uniquely positioned to lead the biomedical revolution in precision health, ensuring our continued ability to guide healthcare through significant global changes.
Value Focused
Provide a highly personalized patient experience.
Ensure a seamless Stanford Medicine experience.
Digitally Driven
Amplify the impact of Stanford innovation globally.
Deliver human-centered, high-tech, high-touch care and revolutionize biomedical discovery.
Lead in population health and data science.
Uniquely Stanford
Accelerate discovery in and knowledge of human biology.
Discovered here, used everywhere: advanced fundamental human knowledge, translational medicine, and global health.
Ensure preeminence across all our mission areas.
Variance Analyses
Normally, managers are expected to examine positive and negative variances, and then speculate as to possible explanations for the observed variances. Following this initial assessment, managers would be expected to dig deeper into those variances of greatest concern to the organization to uncover the actual causes for the variances, and then implement necessary corrective actions. Digging into all variances would be costly and, quite frankly, a misuse of time and energy.
The CFO asked one of her financial analysts to conduct a variance analysis of the company’s consolidated balance sheets and income statements for fiscal years 2015, 2016, 2017, and 2018, which has been completed. The analyst determined the variances for each account (line item) captured in the financials. Now that this first step has been accomplished, the CFO would like you to pay particular attention to the negative variances contained in the spreadsheet and focus on those variances you believe to be potentially the most impactful to Stanford.
The financial analyst completed your variance analysis over time, which is referred to as a horizontal analysis, and then proceeded to create a common-size balance sheet and income statement for each of the four fiscal years (2015-2018). The common-sized financials are captured in the provided spreadsheet.
Financial Management and Strategic Direction
Once you’ve completed your horizontal and vertical analyses of the financial statements, you should be able to get a sense of how well management has managed the financial resources of the company in support of its strategic direction. In business, the strategic direction should be evident in its vision and mission statements, and strategic priorities. The strategic priorities should support the company’s mission, and the mission should help advance the firm’s vision for the future. Failure to effectively manage the company’s financial resources can seriously compromise the firm’s ability to fulfill its mission and, subsequently, its vision.
Submission
Based on the provided scenario, create a 3-4 page business memorandum to Linda Hoff, Stanford’s CFO. For guidance on writing a memo, take a look at this Sample Memo [DOCX] Download Sample Memo [DOCX].
In your memo, codify your findings and interpretations from the horizontal and vertical analyses and the level of alignment in the company’s fiscal management and strategic direction. Include the provided Excel spreadsheet you used to complete your analysis as an attachment to the memo. In this memo, you will:
Review the year-over-year variances contained in the audited Stanford balance sheets and income statements for fiscal years 2015-2018 in the  Week 5 Assignment Spreadsheet [XLSX] Download Week 5 Assignment Spreadsheet [XLSX]. You’ll be expected to pay particular attention to the negative variances (color-coded in red) that you believe to be potentially the most impactful to Stanford and provide a rationale for that belief.
Hypothesize as to the reasons for the negative variances. Be sure the hypothesis is supported by evidence from the scenario, the balance sheets, and income statements.
Explain the proportional changes in the common size results over the four fiscal year time frame and identify notable changes in the ratios. Also include a hypothesis, supported by a rationale, to suggest why these anomalies may exist.
Identify notable patterns and variances that warrant further investigation and justify both with evidence from the three-year period. Specify the potential consequences of the variances to justify the need to examine these variances further.
Assess whether the vision, mission, and goals of the organization are aligned with its current financial position and provide an explanation of why it does or does not align. Provides specifics from the variance analysis to support the assessment.
This course requires the use of Strayer Writing Standards (SWS). The library is your home for SWS assistance, including citations and formatting. Please refer to the Library site for all support. Check with your professor for any additional instructions.
The specific learning outcome associated with this assignment is:
Audit financial statements and expenditures for alignment with organizational strategic priorities.
View Rubric
Week 5 Assignment – Strategic Financial Analysis
Week 5 Assignment – Strategic Financial Analysis
Criteria Ratings Pts
Review the year-over-year variances contained in the audited Stanford balance sheets and income statements for fiscal years 2015–2018.
28 to >25.19 pts
Exemplary
Reviewed the year-over-year variances contained in the audited Stanford balance sheets and income statements. Review specifically highlighted the negative variances that you believe to be potentially the most impactful to Stanford and provided a rationale for that belief.
25.19 to >22.39 pts
Competent
Reviewed the year-over-year variances contained in the audited Stanford balance sheets and income statements. Review specifically highlighted the negative variances that you believe to be potentially the most impactful to Stanford but did not provide a rationale for that belief.
22.39 to >19.59 pts
Needs Improvement
Reviewed the year-over-year variances contained in the audited Stanford balance sheets and income statements, but the review did not specifically highlights the negative variances that you believe to be potentially the most impactful to Stanford.
19.59 to >0 pts
Unacceptable
Did not review the year-over-year variances contained in the audited Stanford balance sheets and income statements.
/ 28 pts
Hypothesize as to the reasons for the negative variances.
28 to >25.19 pts
Exemplary
Hypothesized as to why the negative variances have occurred. Hypothesis is supported by evidence from the scenario, the balance sheets, and income statements.
25.19 to >22.39 pts
Competent
Hypothesized as to why the negative variances have occurred. A rationale was provided for the hypothesis, but specific evidence from the scenario, the balance sheets, and income statements was not included as part of the rationale.
22.39 to >19.59 pts
Needs Improvement
Hypothesized as to why the negative variances have occurred, but no rationale or evidence was provided for the hypothesis.
19.59 to >0 pts
Unacceptable
Did not hypothesize as to why the negative variances occurred.
/ 28 pts
Explain the proportional changes in the common size results over the four fiscal year time frame and identify notable changes in the ratios.
21 to >18.89 pts
Exemplary
Explained the proportional changes in the common size results over the four fiscal year time frame and identified notable changes in the ratios. Also included a hypothesis, supported by rationale, to suggest why these anomalies may exist.
18.89 to >16.79 pts
Competent
Explained the proportional changes in the common size results over the four fiscal year time frame and identifies notable changes in the ratios. Included a hypothesis to suggest why these anomalies may exist but did not provide a rationale for the hypothesis.
16.79 to >14.69 pts
Needs Improvement
Explained the proportional changes in the common size results over the four fiscal year time frame. May or may not identify notable changes in the ratios and did not include a hypothesis to suggest why these anomalies may exist.
14.69 to >0 pts
Unacceptable
Did not explain the proportional changes in the common size results over the four fiscal year time frame.
/ 21 pts
Identify notable patterns and variances that warrant further investigating and justify both with evidence from the three-year period.
21 to >18.89 pts
Exemplary
Identified notable patterns and variances that warrant further investigating and justified both with evidence from the three-year period and specific potential consequences of the variances the need to examine these variances further.
18.89 to >16.79 pts
Competent
Identified notable patterns and variances that warrant further investigating and justified the need to examine these variances further with evidence from the three-year period OR specific potential consequences of the variances (not both).
16.79 to >14.69 pts
Needs Improvement
Identified notable patterns and variances that warrant further investigating and provided a rationale for noting the patterns and variances, but did not justify the need to examine these further with evidence from the three-year period or specific potential consequences.
14.69 to >0 pts
Unacceptable
Did not identify notable patterns and variances that warrant further investigating.
/ 21 pts
Assess whether the vision, mission, and goals of the organization are aligned with their current financial position and provide an explanation of why it does or does not align.
28 to >25.19 pts
Exemplary
Assessed whether the vision, mission, and goals of the organization are aligned with their current financial position and explained why it does or does not align. Provided specifics from the variance analysis to support the assessment.
25.19 to >22.39 pts
Competent
Assessed whether the vision, mission, and goals of the organization are aligned with their current financial position and explained why it does or does not align, but did not provide specifics from the variance analysis to support the assessment.
22.39 to >19.59 pts
Needs Improvement
Assessed whether the vision, mission, and goals of the organization are aligned with their current financial position, but did not explain why it does or does not align.
19.59 to >0 pts
Unacceptable
Did not assess whether the vision, mission, and goals of the organization are aligned with their current financial position.
/ 28 pts
Clarity, writing mechanics, and SWS formatting requirements.
14 to >12.59 pts
Exemplary
Writing has very few spelling, punctuation, and grammatical errors; few fragments, comma splices, and run-ons. 0–2 errors present.
12.59 to >11.19 pts
Competent
Writing has spelling, punctuation, and grammatical errors that are distracting in a few places; few fragments, comma splices, and run-ons. 3–4 errors present.
11.19 to >9.79 pts
Needs Improvement
Writing has spelling, punctuation, and grammatical errors that are distracting in some places. 5–6 errors present.
9.79 to >0 pts
Unacceptable
Writing has spelling, punctuation, and grammatical errors, fragments, comma splices, and run-ons that distract from the message. More than 6 errors.
/ 14 pts
Total Points: 0
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