Happy Hospital

Happy Hospital

Mr. Harm O. Knee, CEO of Happy Hospital, has discussed the need to automate some of the medical records and move toward an electronic medical record. The solvency and profitability numbers all reflect the fact that Happy Hospital has had two difficult income years. As the company may have noticed, Happy Hospital did not have any debt coming into 2008, although they did take on some long-term debt this year. Due to the hospital lost of money, they have negative interest and debt service coverage ratios. All of the profitability ratios are negative as Happy Hospital had both operating and total losses for the year. Clearly there are serious signs of financial stress, and we have our work cut out for us to turn around the two years of operating losses. (University of Phoenix, 2009).

Happy Hospital must consider the following to decide what the option to implement would be: how can budgets and performance reports be used in the decision making process, how will ethics influence accounting decisions and what accounting information is most relevant when making decisions. The two basic types of decisions are planning and control. Happy Hospital will use planning decision by setting objectives and outlining how to attain the objectives (Burgstahle et al, 2008).

A budget is a quantitative expression of a plan of action whereas performance report “provide feedback by comparing results with those plans and by highlighting variances” (Burgstahle et al, 2008, p. 10). Budget and performance can be used by Happy Hospital in several ways. To compare the options available, Happy Hospital can use labor hours and production values to assess expected profits, Budget information can be used to determine if the company will be more profitable by becoming a representative for another manufacturer.

A performance report is a report on the performance of something. They are routinely produced by government bodies which, being financed by public money, are...