February 27, 2019
Ms. Carolyn Ringer
Menotomy Health Services
Subject: Menotomy Health Services Financial Position
Dear Ms. Ringer,
This document contains information regarding the Menotomy Home Health Service 2011 financial statements and reconciled pro-forma. In addition, the non-for-profit organization can continue its line of credit as it has a good credit score.
Menotomy Home Health Services is a health service that is growing over the years. In operating the company, I found that the main cashflow problem is that you believe that the company had not face any cash or financial problem in the past months, which means the company has expanded the office space and hired more employees to meet the demand. Hiring employees come with increase in expenses due to training and other related expenses, but you believe that you would not generate enough cash. Hence, cash management will be challenging as it has to align with the operating expenses to the company’s revenue, improving operating costs and decreasing the amount in cash receivables, in order to improve the cash flow.
Below is a brief analysis of Menotomy Home Health Services that are mostly relevant to better understand the company’s position:
The company is capable of catering its services to different consumers, which helped the organization to diversify revenue streams. The human resources have a very talented team which is integral to the company’s success.
Menotomy Home Health Services has a weak business model in terms of policy payments, and or negotiation with vendors or suppliers. Another weakness could be a high turnover because of increase in employees. Current workers might be leaving because of new employees getting hired, which means less opportunity for them to show their skills to the upper management.
Expanding physically is helpful for the company but expanding in online space would also enable the Menotomy Home Health Services to provide new offerings to the clients in the industry. This might also allow the company to increase its revenues.
With the high turnover of employees and innovative solution, Home Menotomy Health Services might face skilled human capital.
One of the issues is that the company generates low-profit, as it expanded its office space and increased the number of employees by 30%. Each employee costed more due to training expenses and other additional payment to staff. Collection of payments (Accounts Receivables) are increasing each year (Exhibit I). Possible causes could be due to increase in bad debts, or not being able to maintain a good relationship with supplier. It is quite clear that amount in accounts receivable indicates a poor collection policy by the company. You focused too much on the growth of the business without looking in accounts receivable. Lastly, the overhead and administration expense has significantly increased over the years from $63,129 in to $136,310 in 20...