Omega Health Foundation Paper

Omega Health Foundation Paper
Andrea Watts
April 26, 2010
Facilitator: James Traylor

The purpose of this paper is to evaluate the finances for Omega Health Foundation. In reviewing the financial statements for Omega Health Foundation, I will explain principles of finance and how they relate to the Omega Health Foundation’s financial position. I will compare and contrast net income and cash flows, compare and contrast market value and book value of the assets, address the weakness and strengths, if any, of Omega’s financial position, state recommendations that I would make to strengthen Omega’s financial position, and I will state any additional information to further evaluate Omega.
Principles of Finance
The Omega Health Foundation is a business with two hospitals and other related service providers.   Unlike other organizations, Omega Health Foundation is a complex business. There are principles of finance that relate to Omega Health Foundation. According to (n. d.) “The principles consist of risk-return tradeoff, liquidity versus profitability, matching principle, leverage, time value of money, and valuation” (The eight principles of accounting, para 1). The risk-return tradeoff refers to the higher the risk investment, and the higher the expected return must be. Liquidity versus profitability occurs when there is a difference between liquidity and profitability, thus gaining more of one that means giving up some of the other. The matching principle should involve Omega Health Foundation assets matching the organization liabilities. The short-term assets should be financed with short term liabilities and long term liabilities should be financed with long term financing. Leverage is a measure of earnings that develops from acquiring fixed costs in the company. Time value of Money involves an investment that will earn a return over a length of time. Using Time value of Money is very beneficial to Omega Health Foundation because a dollar earned...