Case 1 illustrated an extensive financial and operating analysis of Riverview Community Hospital.
In this case (Case 29), students prepare a financial plan, consisting primarily of pro forma (forecasted) financial statements for the same hospital.
This case requires many assumptions about future events at the hospital. The sole basis for making these judgments are the historical data (and analyses conducted in Case 1) plus knowledge of general trends in hospital industry.
The model was constructed using the percentage of sales (constant growth rate) method of forecasting with a totally arbitrary 10 percent growth for all balance sheet accounts and income statement items that might be tied to sales. The 10 percent growth rate multipliers are contained in Column I. To complete the case, students must make their own judgments about the best forecasting technique to apply to each line as well as the input assumptions needed for the technique selected. In essence, each line must be analyzed separately and modified as needed to create the best possible forecast. Note that the model extends out to Column S. Also, note that the student version of the model is the same as the instructor version.
The model is circular, and hence often requires multiple recalculations before the forecasted values stabilize. To account for this, the model is set to automatically recalculate 100 times.
Note that the model is set up very simplistically, in that any external funds needed are automatically obtained by long-term debt financing. Furthermore, any surplus funds generated are automatically added to the cash and investments account. Any change to these assumptions requires revision of the model.