Chapter 2: Business Transaction Analysis and Financial Statement Effects

http://money.cnn.com/news/newsfeeds/articles/marketwire/0559726.htm

SUMMARY

Health Benefit Direct, an American based company located in Florida, has released its financial results for the third quarter ended September 30, 2009. This company’s specialty is in the marketing, selling, and administration of a wide range of health insurance products. In the third quarter of this year, the company is continuing the restructuring of their products available for customers. Health Benefit Direct will discontinue selling health and life insurance and instead they will be focusing on offering assistance to customers on shopping, comparing, and applying for health insurance from other carriers. The company has disposed a significant portion of its agency business, which is now classified under discontinued operations in the company’s financial statements. Health Benefit Direct’s subsidiary, InsPro Technologies, is an internet-based marketing and administration system used by insurance carriers to provide professional web-based quotes of more than 100 insurance products.

CONNECTION

In chapter 2 we were introduced to analyzing transactions from everyday business activities and analyzing and interpreting financial statements to obtain the required information for our needs. Looking at Health Benefit Direct’s income statement they have increased their revenues from $1.4 million in the third quarter of 2008 to $1.5 million in the third quarter of 2009. Their operating expenses have increased as well from $3 million in the third quarter of 2008 to $3.7 million in 2009. By looking at the company’s operating expenses we can find out what caused this increase in expenses. The income statement shows that the company has invested a huge sum of money in advertising and marketing and also in their professional fees. They spent $6717 in the third quarter of 2008 compared to $90 814 in 2009 for their advertising and marketing. Their professional fees had an increase of about $200 000 over the past year. My interpretation is that all these increases in operating expenses were caused by the restructuring of the company so they needed to hire more professional staffs and consultants to meet their clients’ needs as well as to advertise their new services.

REFLECTION

The management team of Health Benefit Direct is making a profitable decision by cutting back on expenses that is not essential to their business. As stated by the CFO of the company, Anthony Verdi, "We realized an $800 000 net gain from discontinued operations in the third quarter as we continue to reduce expenses that are not essential to our core technology business.” It looks that Health Benefit Direct is on its way to seeking higher profits from their services. Instead of competing with other insurance companies to sell their products, they are now co-operating with other insurance companies instead. With all the different insurance companies claiming that they have the best insurance products, consumers need a company like Health Benefit Direct to help us make the right decisions. The company emphasizes in quality products as the other companies they work with are some of the most highly rated carriers available.