Analysis of Financial Performance of Council Designated Hospitals (CDHs) and Volunteering Agency Hospitals (VAHs) in Tanzania

Abstract

The primary objective of this paper is to analyze and compare the financial performance of council designated hospitals (CDHs) and volunteering agency hospitals (VAHs) in Tanzania. specifically, the study involves analysis of financial performance of the two categories of hospitals based on operating margin, growth rate in equity, current ratios, days cash on hand, equity financing and average age of plant during 2011/12 - 2014/15. Ratio analysis technique was employed in the analysis of performance of the two categories. Data were extracted from respective hospitals’ annual reports and stratified sampling procedure was used to define the sample whereby Lake Zone, Eastern, Western, Southern and Northern Zone were treated as stratum. The aim of using stratified sampling aimed at obtaining representation of the total population (90 faith based private hospitals) in the country. Result revealed that Hospitals in both categories seem to have good liquidity position, evidenced by current ratios which is above the required benchmark of 2.0 times, as well as reasonably average days cash on hand (DCH) of at least 20 days. However, CDHs seems to outperform the VAHs in terms of liquidity over the sampled period. As far as the operating margin is concerned both categories were not performing well, since they all have negative or almost zero operating margin. Result on growth rate in equity indicates that both categories have zero or less than one percent growth in equity which is very marginal. Average age of plant was higher in VAHs category compared to their CDHs counterpart. Since both categories are not performing quite well in many aspects (such as profitability, equity financing, and growth rate in equity) the study recommends that administrators should ensure stability in liquidity. Good performance in liquidity and zero leverage make the hospitals safer (less risk) as far as solvency and financial condition is concerned.