In our industry, the term “financial analysis” is generally used to describe a broad range of activities relating to the evaluation of the operational performance of medical facilities. Most people believe that financial analysis is only performed at certain limited times of the year such as during the preparation of the coming year’s budget. In truth, if properly performed, financial analysis is an integral part of every aspect of a facility’s operation. Pre-Opening – The evaluation done to determine whether a new medical facility should be built or an existing facility should be purchased is critical to the enterprise’s long term success. For existing facilities, historical case loads, revenues, and expenses must be clearly evaluated along with the changes in these areas planned under the new operations. For new facilities, not only must cases, revenues and expenses be estimated, but also the cost and timing of the opening of the new facility must be accurately calculated. Financial analysis is the key to making this happen. Opening – A solid financial analysis projects by month the revenues and expenses for the new business, as well as its monthly cash flow. Effectively the pro forma for the new business becomes its budget for the first year of operations. Proper financial analysis allows owners to “look forward” through the critical first six months of operations and make sure enough cash is available to fund its increasing level of expenses as it grows. Operations – A number of financial analyses are employed during the operating phase of the business. Everyone is familiar with monthly financial statements, which can be used to compare operational results to budget and prior year results. Equally important are operating statistics, which measure items such as net revenue per payer, net revenue per procedure type, labor hours per case and supply and implant dollars per case. A weekly staff planning tool is also used to schedule staff by day for the coming week, as well as a rolling 30-day cash flow preparation to establish the amount of monthly distributions. These are all forms of financial analysis which contribute to the successful operation of the facility. Sale/Debt Recapitalization – Whether the facility’s owners choose to gain liquidity through the sale of their facility or by borrowing cash through a debt recapitalization, financial analysis provides them with the tools needed to manage their cash returns. Well conceived pro forma cash flow projections for the business provide either the equity buyer or the debt-financing source with the insight and comfort to determine a full value for the business. Another effective tool that can be used to establish entity value is the EBITDA-based multiple value for the business. Finally, an analysis of the tax considerations and cash distributions of the transactions must be performed so that the investors understand the after-tax return they have achieved. Financial analysis is not a static term; it truly impacts every stage of the business.