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Slides for Class 8 Strategic Financial Planning February 28, 2002

Slides for Class 8 Strategic Financial Planning February 28, 2002. Strategic plans, Financial plans and Management control. The Strategic Planning Process. Integration of Strategic and Financial Planning (Figure 9-1, p. 194) Financial-Policy Targets (4): Projected Revenues;

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Slides for Class 8 Strategic Financial Planning February 28, 2002

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  1. Slides for Class 8Strategic Financial PlanningFebruary 28, 2002 Strategic plans, Financial plans and Management control

  2. The Strategic Planning Process • Integration of Strategic and Financial Planning • (Figure 9-1, p. 194) • Financial-Policy Targets (4): • Projected Revenues; • Projected Assets; • Debt Policy; • A projected ROE linked to the strategic plan that is sufficient to meet the GRIE required (Figure 9-2, p. 196)

  3. Requirements for Effective Policy making. (10) • An accounting system capable of providing data on costs, revenues, and investments along program lines. • Remember that even when no new programs are planned, this does not imply a zero-growth in assets. • Providing for Working capital is a major element in computing a HCO’s future needs for assets. • HCOs should accumulate funds for future investments that are critical to long-term solvency. • A formally defined debt capacity ceiling should be established. • Return on Investment (ROI) by program area should be an important criterion in program selection. • Non-operating sources of equity should be included in the financial plan.

  4. Requirements for Effective Policy making: (10) [continued] • The financial plan must be integrated with the management control system. • The financial plan should be updated at least annually. • The financial plan is a board document and should be formally approved by the board.

  5. Developing the Financial Plan • The Developmental Process • Assessment of Present Financial Position • Defining Growth Rate in Assets • Definition of Debt Policy • Assessing the reasonableness of targeted Required Equity Growth

  6. Integration of the Financial Plan with Management Control • Financial Ratio Targets for Omega health Foundation. [Figure 9-4, p. 213]

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