New Medical Center Financial Crisis Case Study - Nursing Assignment Help

Assignment Task

LO 1 Demonstrate an understanding of management accounting systems

Case Study 1 - 'New Medical Center' Financial Crisis - UAE 
"The crisis unfolding at NMC Health,  Middle East’s largest hospital operator, reignited the debate about the governance of overseas companies listed in London. NMC operates the largest medical network in the United Arab Emirates and in 2012 became the first Abu Dhabi company to list in London.
The mystery of NMC’s ownership structure deepened after founder and co-chairman Bavaguthu Raghuram Shetty quit the board of the FTSE 100-listed company over concerns that he misreported his stake. The shares started teetering in mid-December when Muddy Waters alleged that NMC manipulated its balance sheet and inflated the prices of companies it acquired.
The shares of NMC Health, a component of the London Stock Exchange’s FTSE-100 Index, were suspended from further trading. After an internal review a morass of fraudulent accounting and fiduciary overlaps were observed. The CEO of NMC Health -C.A. Prashanth Manghat — which has health-care operations in 19 countries and is based in the UAE — was fired, after discovering it could be on the hook for £260million of secretly arranged loans, while placing its CFO on extended sick leave. The UK’s Financial Conduct Authority is investigating after the board said investigators found firms controlled by ousted former joint-chairman BR Shetty and former vice-president Khaleefa Bin Butti Al Muhairi had taken out loan facilities to pay suppliers, drawing out almost £260million. NMC was secretly put down as a guarantor for the loans without board approval, meaning it could be asked to repay creditors if Shetty's companies cannot.
Since then, four board directors have resigned, including Chief Investment Officer Hani Buttikhi and Non-Executive Director Abdulrahman Basaddiq, who joined under a relationship agreement between the company and principal shareholders Shetty, Saeed Al Qebaisi and Khaleefa Al Muhairi. As a result, NMC said it did not consider Basaddiq to be independent.
“The saga at NMC Health continues and so does the suffering of its shareholders. The whole affair is turning into one of the worst stock market disaster stories of recent times,” said Russ Mould, investment director at stockbroker AJ Bell.
“It has raised serious questions about how corporate governance issues and overseas listings are handled by the regulators. After all, the private healthcare operator is not some pie-in-the-sky. It is, for now at least, a FTSE 100 company. Sadly it is not acting like one,”
Point of Concern - NMC shares lost almost half their value in the first week of February on speculation the company’s main investors faced a margin call, in which banks seize shares pledged as collateral. NMC confirmed that First Abu Dhabi Bank and Al Salam Bank Bahrain obtained 20 million shares in the company from BRS International Holding, an investment vehicle of NMC’s top shareholders. The banks sold more than 8 million of those shares as “enforcement of security,” NMC said.
The Financial Conduct Authority last week opened an investigation into the company after trading in its shares on the London Stock Exchange was suspended and the company fired its chief executive, Prasanth Manghat, and granted its chief financial officer, Prashanth Shenoy, “extended sick leave”.
The clearout at the top of the company came after a board-commissioned investigation by the former FBI director Louis Freeh found that the company had entered into $335m of secret financing arrangements that were used by entities controlled by Shetty and Khaleefa Butti, another of the main shareholders.
The turmoil at the group was triggered by a December report by short-selling hedge fund Muddy Waters, which said it had concerns over asset values, cash balance, reported profits, and reported debt levels, as well as possible fraud and theft. NMC denied those allegations.
(Excerpts from source: The Guardian)
Based on the above case study, students are required to critically evaluate how management accounting systems and management accounting reporting are integrated within NMC Healthcare’s processes, when responding to the following questions: -
Evaluate the concept of ‘management accounting’ and give the essential requirements of different types of ‘management accounting’ systems, as well as different methods used for ‘management accounting reporting’ in order to strengthen the ethical system within the company which is facing crucial financial fiasco. Critically evaluate the benefits of ‘management accounting systems’ and ‘management accounting reporting’, as well as by assessing how these systems are integrated within the NMC’s organisational processes for improved and ethical financial performance in future.
(Answers will be graded for application within the company’s context)
LO 2 - Apply a range of management accounting techniques. 

Case Study 2 - Graphics Systems Limited
It was discovered that Graphics Systems Limited uses Standard Costing and Absorption Technique in its costing activities. It was also found out that the company was fulfilling its objectives since there the profits of the firm were increasing, sales were increasing, customers had increased and due to the fact that brand loyalty had been achieved. It was lastly found out that there is a strong significant relationship between Costing Techniques and the firm’s effectiveness since there was increased revenue, increased profitability, increased customer base, proper inventory management and improved corporate responsibility. 
It was concluded that Graphics Systems Limited uses Standard Costing and Absorption Technique in its costing activities and therefore there was increased revenue, increased profitability, increased customer base, proper inventory management and improved corporate responsibility which validated a strong significant relationship between Costing Techniques and the firm’s effectiveness. 
It is recommended that Graphics Systems Limited should try out some more costing techniques such as direct costing and Marginal Costing. The researcher recommended that firms should manage company resources through the use of costing activities because it can help to bring about accountability and transparency through increased corporate responsibility. This can help to improve on the effectiveness of Graphics Systems Limited and other related organizations world over. Studies recommended that Graphics Systems Limited should increase on number of staff with relevant knowledge on costing activities since it was seen that the nature of costing determines the firm’s performance. 
Costing techniques are methods for ascertaining cost control and decision-making purposes, (CIMA, 2009). They can be applied to make-or-buy decisions, negotiation, price appraisal and assessing purchasing performance. They include; Marginal Costing; a technique of costing in which allocation of expenditure to production is restricted to those expenses which arise as a result of production, e.g., materials, labor, direct expenses and variable overheads. Fixed overheads are excluded in cases where production varies because it may give misleading results. The technique is useful in manufacturing industries with varying levels of output. Direct Costing; the practice of charging all direct costs to operations, processes or products and leaving all indirect costs to be written off against profits in the period in which they arise is termed as direct costing. The technique differs from marginal costing because some fixed costs can be considered as direct costs in appropriate circumstances. Absorption or Full Costing; the practice of charging all costs both variable and fixed to operations, products or processes is termed as absorption costing.
Focus on:
Prepare an income statement that depicts the changes in profit values & individual cost lines for company in case by calculating costs applying absorption costing and marginal costing scenarios. Do you believe that costing plays an important role in managing sales & eventual profitability, if so, use a range of accurate management accounting techniques in producing appropriate financial statements? Produce a range of financial reports that interpret data accurately for a range of business activities in the organization by recommending effective costing techniques are used at Graphics Systems Ltd? Critically evaluate the relationship between costing techniques and the effectiveness of graphics systems limited?

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