Question

Cash Flows Statement for King Hospital is included below: After reviewing the statement, address the following issues in your analysis discussion. You do not have to use APA format. Be sure you cover each discussion point in your answer. You may do that in paragraph form or by using a bulleted list of discussion points (1-5).  

Discussion point 1: What does this statement tell a manager? (3 points)

King Hospital Statement of Cash Flows for Fiscal Years Ending June 30, 2019 and 2018 (000s omitted)

Cash Flow from Operating Activities                                      2019                            2018

Collections from patients and third-party payers    $17,825                         $16,232

Collections from other operating activities 1, 919                          1,432

Payments to suppliers                                                               (2,122)                        (1,876)

Interest payments                                                                     (2,333)                         (2,290)

Payments to employees                                                           (14,228)                      (12,055)

Net cash from operating activities                                            $ 1,061                        $1,443

Cash Flows from Investing Activities

Earnings from restricted investments                                         $   350                            $350

Increase in sinking fund                                                               (300)                           (280)

Net cash from investing activities                                                   $50                                $70                                                     

Cash Flows from Financing Activities

Payments of mortgage principal                                                       $(2,000)                 $(1,800)

Borrowing from bank 500                                0

Net cash used for financing activities $(1,500)                $(1,800)

Net Increase/(Decrease) in Cash                                                     $ (389)                   $ (287)

Cash, Beginning of Year                                                                     539                          826

Cash, End of Year                                                                           $    150                      $ 539

(Note that parentheses on a financial statement indicate a subtraction or negative number.)

Answer 1

Based on the information provided in the cash flow statement, it can be concluded that the company's cash flow position has deteriorated as evident from the decline in ending cash balance from $539,000 in 2018 to $150,000 in 2019. The major contributor to decline in cash flows is the "Cash Flow from Operating Activities" which has decreased from $1,443,000 in 2018 to $ 1,061,000 in 2019. A decline in cash flow from operating activities may be on account of inefficient management of business operations.

The decline in the value of "Cash Flow from Investing Activities" from $70,000 in 2018 to $50,000 in 2019 is not significant enough. The "Cash Flow from Financing Activities" has improved from a negative balance of $1,800,000 in 2018 to a negative balance of $1,500,000 in 2019.