Blackhawk Urology Harvard Case Solution & Analysis

CASE QUESTIONS

i) What problems exist currently?

ii) What key issues have created a problem?

b) RECOMMENDATIONS

1) First of all there is a need to take account of the debt structure of Black hawk because as per the exhibits it can be seen that this can create problems for the company in the future.

blackhawk urology case solution

blackhawk urology case solution

a) It is evident that in the fiscal year 2006 the debt is almost 37% but in the fiscal year 2007 it has increased upto 47%.

b) Hence, the course of action that should be taken by Black  hawk is not to rely on debt heavily because it will result in the better prospects of the business.

c) Moreover, this alternative will also bring an increase in the value of a company and the company that will generate sufficient profits in the future.

d) Other than that, if Black hawk will rely too much on borrowings then it may have to face a significant rise in the interest payments.

e) The increase in the payments is evident from the fact that can be seen in the exhibits that the interest payments have increased by a substantial amount.

2) Moreover, the financial ratios as per the exhibits are showing an increase in the receivable days in the fore casted period.

a) In 2007, the receivable days are 151 days and in the fiscal year 2006 there are 140 receivable days.

b) The total asset turnover is also showing an increasing trend which seems to be a good sign because it represents that the company will be able to generate sufficient return by making an efficient use of assets.

 ANALYSIS

BASE FORECAST

 1) Firstly, the analysis takes account of the financial statements for a time period of three years, which is comprised of the fiscal year 2004, 2005 & 2006.

2) By taking account of total revenues, total expense as well as the Gross profits and the Total assets the performance of the company can be measured effectively.

a) The base forecast is reflecting that there is a growth in the Copays which is $151 in 2006 and it was almost $58 in 2004.

b) Moreover, the insurance payments are also showing an increasing trend because it is showing an increase of almost $1526.

c) On the other hand, the refunds in the fiscal year 2006 were higher than the refunds in a fiscal year 2004. As it is evident that the refunds in 2004 were $5,000 and they were $11,000 in 2006.

d) In addition to this, the total revenue in the fiscal year 2006 is higher than the year 2004 and it seems to be a good sign, but in percentage terms a better picture can be seen of Black hawk Urology which is almost 3.3% as compared to 21% in a previous year.

e) Hence, the alternative that can be taken into account is that there is a need to bring amendments in the strategies that have been adopted by the business in order to bring a substantial increase in the revenues generated by the treatment that has been provided.

3) Overall, the total expenses in total are showing an increasing trend which represents that if the costs spiral out beyond the control of the company then it may face further difficulties.

a) The office expenses are showing an increasing trend, which will have to be controlled and the alternative that should be taken into consideration is the mechanism that will have to be put in place which may prove beneficial in the approval of the office expenses.

b) The expenditure related to the medical equipment is also reflecting an increasing trend and it is evident by taking account of the results in percentage terms. Hence, in the fiscal year 2006 the expenses are 9% as compared to 8% in a previous year.

c) The cancer meds are also increasing with a percentage of 17% in the fiscal year 2006 which is comparatively higher than the proportion of cancer meds which was 11% in 2005.

d) The rent that relates to the premises of the building that is under the use of Black hawk Urologists also seems to be expensive because of the rise in the payment of rentals. So, the alternative to this building that can be adopted is to acquire a new facility has been taken into consideration by Kerns and Oldham.

e) The staff’s salary that has been paid by Black hawk Urology is not showing a substantial increase, which is evident from a slight increase in the staff salary by the year 2006 which is 18% and it was 16% in the fiscal year 2005.

Hence, the alternative to this approach will be to design such policies that will result in the increase of the motivational level of the employees............................

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