Introduction
In the years 2014, Stanford Hospital and Clinics changed its name to what is currently referred to as Stanford Health Care to clearly reflect the ranges and focus of the organization and their overall commitment to healing humanity via science and compassion (Stanford Health Care, 2014). The hospital has been for many years providing licensed acute care and cancer services. According to Stanford Health Care (2014), Stanford Health Care also runs many outpatient physicians’ clinics across San Francisco Bay regions. It is considered a primary teaching affiliate of Stanford University School of Medicine that offers primary and specialty health services to the adults ranging from cancer treatment, neurosciences, cardiac care in addition to the transplanting of organs. The essay will focus on interview questions for the Chief Financial Officer position at Stanford Health Care. The interview process will, therefore, comprises of three distinct interviews with the following three different individuals, the CEO, the finance committee for the hospital’s Board of Trustee and the external audit team.
The CEO
Question 1
Mr. Vincent, thank you very much for your interest in interviewing for the position of the CFO position with Stanford Health Care. Having been working for many years with the organization, what can say is your thought concerning personal attention to the customer’s needs in today’s competitive world?
Delegate your assignment to our experts and they will do the rest.
Response 1
Customers are considered the backbone of the company’s success and have been critical towards the growth and development of the enterprise. According to Stanford Health Care (2014), companies often strive to attain a healthy and huge customer base that would influence sales and revenues. Customer satisfaction is critical to transforming current customers to repeat customers; therefore, personal attention is necessary in this case. Consequently, as a result of a small geographical region, it often becomes very easy for a sole proprietor to efficiently and comprehensively deals with their customers personally and even clearly understand their needs. It tends to make it easy for the sole proprietor to pay unique and distinct attention to individual needs of their customers (Finkler, Ward & Calabrese, 2011).
Questions 2
In the today competitive market, organizations have been forced to majorly focus on team work to ensure that they remain competitive and retain their market value. How would approach teamwork in the organization and what would be your plan to adapt to make sure that you effectively work with the team?
Response 2
First, it is worth mentioning that in the contemporary day, the level of competition has become so intense such that there are very many companies competing for the same group of customers. To create value, there is the need to build teamwork that would ensure that the organization works in the right direction to accomplish the mission and objectives of the company. It is important to create a healthy team relationship that would collaborate to achieve a goal set (Stanford Health Care, 2014). It is the duty of the leader to play an integral role to ensure the success of the team. The same can be achieved by creating a culture of teamwork that will make sure that all staffs work collaboratively for the good of the company. According to Stanford Health Care (2014), adoption in the financial industry is critical, and this can be attained by encouraging the employee to work as a team and shown them the importance of team working to the company and the employees.
Question 3
You have been working closely with the accounts department for years, based on your knowledge within the field of accounting, what is your description of cash system of accounting?
Response 3
It is a system that precisely records the cash receipts in addition to the payments. In addition to this, the cash system of accounting often assumes that there are defined credit transactions (Kurze, 2013). As it is the case with Stanford Health Care’s balance sheets, it is worth to note that in this system of accounting, expenses are considered after they are paid, and the incomes, on the other hand, are only considered after they have been received. The system is commonly used by organizations that are established to operate for non-profit purposes. However, the same system has been considered to be defective in nature because it ultimately fails to show actual revenues earned in addition to the current state affairs of an organization, but this does not gravely affect the overall function of the system (Stanford Health Care, 2014).
Question 4
I am interested in your accounting knowledge in this position, how can you describe accounting period concept? Is it different from going concern concept?
Response 4
Based on the accounting period concept, an indefinite period is clearly subdivided into shorter time periods and each period, in this case, is in the form of an accounting period (Finkler, Ward & Calabrese, 2011). It is done to efficiently facilitate the company’s preparation of the financial statement within a periodical basis. The choice of an accounting period often varies depending on individual characteristics such as the organization of the business in addition to the statutory requirement. On the other hand, going concern concept is a situation where the team is expected to remain operational for an indefinite period, and there are no possibilities of closing it down anytime soon. The concept has been shown to influence the valuation of assets and liabilities (Finkler, Ward & Calabrese, 2011).
Question 5
How can you explain the concept of uniform costing? What is its scope as it applies to Stanford Health Care?
Response 5
Uniform costing is simply the process of applying similar accounting and costing principles, the procedures in addition to the methods uniformly through various undertakings within the same industry (Finkler, Ward & Calabrese, 2011). Therefore, uniform costing can be understood a unique technique that applies general accounting approaches such as standard costing, marginal costing, and budgetary control. Evidently, uniform costing method has been established to be highly advantageous particularly in a single company with several branches, in several companies within the same industry and who are closely interconnected via trade association (Allen, 2013). In addition to this, uniform costing can also be applied in certain industries that are considered to be similar such as cotton, electricity, and gas. Stanford Health Care uses common accounting principles and even standard methods used by member firms within the health industry to ensure that their costs figure is comparable. It can be used to provide critical data to compare the overall production cost in addition to the production efficiencies between companies to another (Finkler, Ward & Calabrese, 2011).
The finance committee for the hospital’s Board of Trustee
Question 1
Mr. Dominic, thank you for your interest in interviewing for the CFO position with Stanford Health Care, based on your understanding of concepts related to this job position, what do you think is the biggest opportunities and challenges that most financial professionals face in the contemporary market?
Response 1
In the modern market, there are critical issues that have continued to affect the operation of companies (Gramling et al., 2014). First, companies are majorly concerned with issues related to reputation issues. With a strong brand reputation, the company is in a better position to attract and retains current and potential customers. There has also been emergence and formulation of strict regulation policies that have significantly affected the company’s profitability as they are required to operate as required by the laws (Kurze, 2013). For instance, most of these regulations are focused on labor law, wage regulation in addition to profit repatriation. In addition to this, there have been concerns related to cost reduction to ensure that organization maximizes their profitability, adopt significant industry innovation in addition to enhanced credit availability. Failure to achieve these, the company will be forced to experience a hard time which will affect their profitability.
Question 2
Taking into consideration your competency in the field of finance, what is your description of capital expenditure?
Response 2
Capital expenditure is simply a specified amount that a company such as Stanford Health Care would incur when acquiring the long-term assets including the land, infrastructure in additional to the critical equipment that the organization continuously utilizes to earn profits (Romney et al., 2006). It might be important to mention that these equipment and assets are not meant for sale. In most instances, such costs are often entered in the following accounts, plants, equipment, and property. Further, the benefits derived from such expenditure are significantly spread over several accounting years. In the recent years, competition for health care capital dollars has considerably increased as third party and the state reimbursement decrease while the patient volume decreases (Robertson & Louwers, 1999). As a result of the rationing situation, Stanford Healthcare supervisor would be required to carefully document and present a capital expenditure request. The application should take into consideration the benefits and the costs of undertaking a new service or even replacing the old asset.
Question 3
Let us take this a little bit higher, what can you say is the primary difference between non-recurring duties and recurring duties?
Response 3
Focusing on the nonrecurring duties, it entails the preparation of the financial plans, and this mostly is done at the period of corporation’s promotion. In addition to this, it is concerned with the fiscal adjustments particularly during the period of a liquidity crisis. According to Ruchaber (2014), nonrecurring duties also focus on the valuation of the company during the period of merger and acquisition. On the other hand, the recurring duty is concerned with deciding various financial needs of the organization including raising the required funds and funds allocation. Additionally, it focuses on the fixed asset management in addition to the working capital management where it addresses income allocation, funds control, and corporate taxation together with the performance evaluation.
Question 4
Please explain your understanding of the concept of the convention of consistency as it is applied in the field of accounting at Stanford Health Care?
Response 4
Accounting convention argues that the same principles, procedures and even policies of accounting ought to be adopted and used consistently, and this is done on a period to period basis for the preparation of the financial statement. This is done to facilitate the comparison of the financial statement on a period to period basis. In case any significant change has been made to the company’s policies or procedures, then it follows that it must be disclosed explicitly while creating the financial statement (Gramling et al., 2004).
Question 5
Lastly, I am interested in your understanding of a share capital. How do we arrive at the share capital when preparing the end of year balance accounting book?
Response 5
In a more general view, a share capital implies a particular portion of the business’s equity which in most instances is obtained through issuing shares to the shareholders. Share capital amount tends to increase significantly as other new shares are sold to the public members in exchange for cash. To arrive at the value of share value, we multiply the face value of the share by the total number of issued, subscribed and fully paid (Young, 2004). There is an instance where Stanford Health Care share capital remains constant for a period, and this is because of the non-issuance of additional shares. In a situation where the organization issues more shares within a specified period, then the effects ought to be seen in the share capital.
The external audit team
Question 1
Mr. Christopher, thank you for your interest in interviewing for the CFO position with Stanford Health Care, having worked at the position as an external audit team, Please what is your understanding of the concept capital structure and the principles of capital structure management?
Response 1
The capital structure is a term used to refer to the mix of resources from which all the long-term funds are needed for business purposes that are raised to improve the capital of the organization. To adequately support the company’s plan, the capital structure is required and often comprises of the equity and debt. It has been shown that the management makes sure that the capital structure accesses the one required funding the company’s future growth and at the same time improving the overall financial performance of the organization (Romney et al., 2006). There are several principles of capital structure management that a company must follow including cost principle, risk principle, control principle, flexibility principle and timing principle. A mandatory disclosure has the potential to alter the organization’s voluntary disclosures and their capital structure choices in addition to their cost of capital (Srinivasan, 2005).
Question 2
What is capitalization according to your knowledge as an external auditor and what are some of its importance to the organization? What can you say amount a balanced capitalization?
Response 2
First, capitalization is simply a new concept with several meanings within the accounting and financial sphere. In accounting, for instance, capitalization can simply be considered as the cost to purchase a given asset that is included in the price of company’s assets. On the other hand, in financial terms, capitalization is simply the cost that is required to purchase a particular asset in addition to the retained earnings of the firm with stock debt and the long-term debt. Currently, there are two distinct forms of capitalization referred including Over-capitalization and Under-capitalization. According to Ruchaber (2014), in the modern economy, capitalization is considered critical when it comes to the determination of the company’s value in the market that is founded on the economy structure of the corporation. It is important to note that this aspect significantly depends on the previous records and entries in addition to the economy of the organization (Ruchaber, 2014). All these have been established to show the particular behavior of the organization’s structure and enable them to develop an effective plan to conduct their marketing. A balanced capitalization is considered as a part of the capitalization particularly when it is compared to relative importance and the value to make it significantly proportionate in a greater sense. In this case, the debit and the credit have to be equal on both sides and further, the shares ought to be shared among all the participants in a fair amount (Allen, 2013). Evidently, capitalization of project costs at Stanford Health Care significantly would affect their balance sheet while at the same time expensing the cost affects the income statement. Therefore, the route the organization would assign will determine whether their assets base would increase or the profit decrease.
Question 3
Differentiate between the convention of materiality and convention of conservation?
Response 3
Convention of materiality is simply an accounting convention that proposes that organization only accounts those transactions that are considered to have a significant impact on the financial status while at the same time ignore the rest of the operations that are believed to have the very insignificant effect on the organization (Young, 2004). It has been shown that convention of materiality often gives relative important to a given item and event. On the other hand, a convention of conservation can be defined as the anticipation of all the future losses and expenses without necessarily taking into consideration the future profits and incomes not unless they are all idealized. According to Ruchaber (2014), the concept has been shown to lay greater emphasis on the notion that the profits should not be anticipated or even overstated. Convention of conservation is commonly applied to the evaluation of the current assets particular as they are valued at the market or even costs whichever will be lower.
Question 4
Explain your understanding of Mercantile or Accrual System of Accounting?
Response 4
When focusing on this type of system, all the incomes and expenses are considered within a given period of which they seem to pertain (Kurze, 2013). The system has been argued to be ideal in accounting; however, it often leads into what has been termed as unrealized revenues that might further reflect on the account’s books on which a company has to pay their taxes too. The company’s forms of organization have been shown to be legally required to adopt and strictly follow the Mercantile or even the Accrual system of accounting (Srinivasan, 2005).
Question 5
Lastly, based on your experience, what can you say is the difference between the share capital & reserves and surpluses?
Response 5
The share capital in one hand can be considered as that particular portion of the organization’s equity which has been acquired through issuing a given amount of shares to the shareholder (Young, 2004). Evidently, the share capital amount tends to increase significantly as new shares are sold particularly to the members of the public in exchange for cash. Reserves and Surpluses have been shown to indicate that particular portion of the company’s earnings, receipt or other surplus appropriated by the management for a general or even specific purpose rather than the provision for depreciation or for what has been determined to be the known liability (Allen, 2013). The reserves are classified as either Capital Reserve or Capital Redemption Reserve. As various studies have established it, the other significant difference between the reserve and the capital is that the invested capital often is applied during the company’s startup phase while on the other hand, the reserve implies to the wealth that is obtained through a profitable operation after the initial business startup. According to Robertson & Louwers, (1999), despite the fact that the two can be saved and used when required, the reserves are often considered as the funds that are saved for the future.
References
Allen, B. (2013). Internal audits can safeguard hospital revenue: hospitals can improve their revenue capture by implementing an automated internal audit function that identifies the root causes of denials, thereby helping to prevent the denials from occurring in the first place. Healthcare Financial Management , 67 (9), 106-111.
Finkler, S. A., Ward, D. M., & Calabrese, T. (2011). Accounting fundamentals for health care management . Jones & Bartlett Publishers.
Gramling, A. A., Maletta, M. J., Schneider, A., & Church, B. K. (2004). The role of the internal audit function in corporate governance: A synthesis of the extant internal auditing literature and directions for future research. Journal of Accounting literature , 23 , 194.
Kurze, S. (2013). Accounting options of emission rights (EU ETS) according to HGB, IFRS and US GAAP. Munich: GRIN Publishing GmbH. Downloaded on March , 30 , 2014.
Robertson, J. C., & Louwers, T. J. (1999). Auditing (Vol. 1). McGraw-Hill/Irwin.
Romney, M. B., Steinbart, P. J., Zhang, R., & Xu, G. (2006). Accounting information systems . Pearson Education.
Ruchaber, J. (2014, June 13). Value -Based Medicine and Business Valuation : Five Considerations. Healthcare Financial Management Association. Retrieved from https://www.hfma.org/Content.aspx?id=23301
Srinivasan, S. (2005). Consequences of financial reporting failure for outside directors: Evidence from accounting restatements and audit committee members. Journal of Accounting Research , 43 (2), 291-334.
Stanford Health Care (2014). Consolidated Financial Statements August 31, 2014 and 2013. Retrieved from https://stanfordhealthcare.org/about- us/bondholder- general-financialinformation/ audited-financial- statements.html
Young, D. W. (2004). Management accounting in health care organizations . John Wiley & Sons.
