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Decision-Making and Forecasting
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Decision Support Tools
How do managers make decisions? How are budgets evaluated? What determines whether equipment is purchased or not? ? ? ? ? ? ? ? ?
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Financial Ratios Used to measure an organization’s performance.
Some global measure of financial success in an organization. Which ratio to use? Need comparative data What is most important??
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Most important ratios ROA: Return on Assets ROE: Return on Equity
ROI: Return on Investment
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Variance Analysis Difference between actual and planned (budgeted)
Part of the cycle of management Analysis and reporting Anecdotal analysis
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The Breakeven Point Determines the level of volume needed to reach financial break-even. The point at which net revenues equals cost. At this point, there is no PROFIT or no LOSS. Expressed in units of volume. Depends on payer source.
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Forecasting Statistical Forecasting Multiple Regression (OLS, MLE)
Spending is a function of different variables. Budget for FY’11 = 0 + 1 (salaries) + 2 (overtime) + 3 (medical supplies) + 4 (equipment)
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Forecasting A prediction of the future Sources of information
historical data, current operating facts and other information Sources of information Upwardly directed Accuracy is key Communications tool List assumptions
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