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Ratio analysis report essay
Ratio analysis report essay
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Lastly, the total asset turnover compares total operating revenue to total assets. The process entails the more revenues an organization can generate per dollars of assets, the more efficient it is, other things being equal, (Finkler, S.A., Ward, D.M. & Calabrese, I.D., 2013). Furthermore, by dividing the amount of the revenue from the year by total assets the ratio will show the amount of revenue for every amount in assets. This ratio method also useful and can help determine the cause and if there are ways to use assets more efficiently and generate more revenue.
Solvency Ratio
Risk in a health care organization is the main focus of the health care organization through frugal search of solvency ratios. The purpose of solvency ratios is to take a long-term view. Additionally, it is to help determine if the organization has overextended itself throughout use of financial leverage. At times, these ratios can be referred to as leverage or capital structure ratios. Three common types of solvency ratios consist of “interest coverage ratio, debt service coverage ratio and “long-term debt to net assets ratio”. They all each compare one item to another and to determine if any risk involved. Nevertheless, has helpful the solvency ratios are the carefulness should be advised for improvement. From the creditor’s and organization’s standpoint, it varies if the organization needs improvement on risk and profits. If charity care helps expenses, but hurts profits the overall interest coverage ratio would be lesser. The debt service ratio coverage is to build interest coverage ratio and give broader complete look at the organizations ability to pay its long-term debt. The process requires to pull information from statement of operations and st...
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...s combination of useful ways to compare, determine, and measure profits, own hospital, and other organizations. The equations and calculations are created for the purpose for organizations and management to use of company standing and profit growth. Accounts receivables is complex, but is created to have a revenue cycle and bring payments in. The revenue cycle is a methodical process used in most organizations for scheduling, revenue turning into cash, and problem solving. Banking relationships are always necessary if the organization permits, and banks are always available to help manage an organization. It’s clear numerous tools and resources are available to help management run their organization smoothly as hurdles can happen of issues. Ratios and accounting equations have a beneficial way of helping organizations in determining the overall standing of growth.
In this case, the reader learns that liquidity is a better than average. The ratio and cash on hand have been better than 2013 from the past years. Moreover, it shows that the hospital has a higher ability to meet its cash obligation because it has more security compared to other hospitals. Funding allows hospitals to control funds and limit investments. Not-for-profit organizations help provide more services and margin of safety. Therefore, creditors look for a margin of safety so that the community that financed a small portion of total financing can be returned to the owners by leveraging. Capitalization ratio measures the funds that were borrowed and the assets that have been used. The coverage ratio measures the number that time they fixed financial charges. The time's interest earned ratio shows the ability of the hospital to meet
I attended the Saturday Lab 1 session discussing the Denison Specialty Hospital case study. In our session, we had a through discussion into the different budget terminology. I learned about the difference between accrual and cash accounting methods, which is based on the timing of when the revenue and expenses are recognized. I also learned about responsibility centers as an organizational unit under the supervision of a manager, who is responsible for its activities and results. In addition, the manager is accountable for the budget of the department that they head. Therefore, a centralized form of management in developing the budget because it makes easier to because the information for the department budget is located
Net working capital represents organization’s operating liquidity. In order to compute the net working capital, total current assets are divided from total current liabilities. When there is sufficient excess of current assets over current liabilities, an organization might be considered sufficiently liquid. Another ratio that helps in assessing the operating liquidity of as company is a current ratio. The ratio is calculated by dividing the total current assets over total current liabilities. When the current ratio is high, the organization has enough of current assets to pay for the liabilities. Yet, another mean of calculating the organization’s debt-paying ability is the debt ratio. To calculate the ratio, total liabilities are divided by total assets. The computation gives information on what proportion of organization’s assets is financed by a debt, and what is the entity’s ability to pay for current and long term liabilities. Lower debt ratio is better, because the low liabilities require low debt payments. To be able to lend money, an organization’s current ratio has to fall above a certain level, also the debt ratio cannot rise above a certain threshold. Otherwise, the entity will not be able to lend money or will have to pay high penalties. The following steps can be undertaken by a company to keep the debt ratio within normal
The purpose of financial measurement in healthcare is to provide the community with the services it needs, at a clinically acceptable level of quality, at a publicly responsive level of amenity, at the least possible cost. This is done by providing healthcare finance managers with accounting and finance information to help accomplish the purpose of the organization (Nowicki, 2015). When making accounting decisions about budgeting and inventory control, an understanding of economics, statistics, and operations research is needed. Major Financial Measures
First, let us analyze General Practice Affiliates’ current financial position. The income and expenses report shows a net revenue of $230,250. The net revenue is obtained after expenses, including taxes, of the company have been subtracted from revenue (Paterson, 2014, p. 124). The balance sheet shows a $306,180 in retained earnings. Retained earnings represent stakeholders’ equity (Paterson, 2014, p. 128). Retained earnings are usually invested back in the form of inventory or debt payments (Albrecht, Stice, Stice , & Swain, 2008). General Practice Affiliates’ cash flow analysis shows that the practice invests in new equipment. However, General Practice Affiliates mainly used cash during 2012. The main source of cash from operations came from depreciation expense, which is not a reliable source of funding (Paterson, 2014, p. 130). Accounts receivable increased by $50,000, while accounts payable only increased by $10,000. In addition, cash flow analysis shows a balance sheet data that is affected by future transactions (Paterson, 2014, p. 128). General Practice Affiliates choose to stretch the time to pay suppliers instead of paying its bills. ...
... organization's management. The ratios were broken down into classifications of liquidity and asset utilization, debt and interest coverage, profitability and market-based ratios.
The first method we will review is the accounting method. Through this accounting approach we will analyze specific ratios and their possible impact on the company's performance. The specific ratios we will review include the return on total assets, return on equity, gross profit margin, earnings per share, price earnings ratio, debt to assets, debt to equity, accounts receivable turnover, total asset turnover, fixed asset turnover, and average collection period. I will explain each ratio in greater detail, and why I have included it in this analysis, when I give the results of each specific ratio calculation.
Organizations use financial statements and ratio analysis assess financial performance viability. The ratio analysis are used to identify trends and to perform organizational comparison (financial) with other companies within same industry. Ratio analysis, using data reported on the financial statements, are divided into five major categories: common size, liquidity, solvency, efficiency, and profitability. This paper will assess the financial stability of John Hopkins Hospital (JHH) using the five ratio analysis.
HCA, after following a conservative financial policy since its establishment, has entered the new decade preparing to make some changes in order to realign their financial strategy and capital structure. Since establishment, HCA has often been used as a measure for the entire proprietary hospital industry. Is it now time for the market to realign their expectations for the industry as a whole? HCA has target goals which need to be met in order to accomplish milestones in the future. The problem arises as to which area holds priority to the company. HCA must decide how the key components of their financial strategy and policy should my approached in order to meet their future goals.
Total Asset Turnover – Dropped from .64 in 2001 to .58 in 2002 to .55 in 2003. The reason is big increase in Total Assets.
The first business principle that is associated with patient and system cost is manage cash flow very closely (Fisher,
Marshall, M.H., McManus, W.W., Viele, V.F. (2003). Accounting: What the Numbers Mean. 6th ed. New York: McGraw-Hill Companies.
Ratios traditionally measure the most important factors such as liquidity, solvency and profitability, as well as other measures of solvency. Different studies have found various ratios to be the most efficient indicators of solvency. Studies of ratio analysis began in the 1930’s, with several studies of the concluding that firms with the potential to file bankruptcy all exhibited different ratios than those companies that were financially sound. Among the study’s findings were that the deciding factor of the predictor of bankruptcy should not be only a few ratios, as the measure of a company’s financial solvency may differ as the firm’s situations differ. The important question is to which ratios are to be used and of those ratios chosen, which ratios are given priority weight.
If a company can generate more sales with fewer assets its turnover ratio will be higher this shows that a company is operating more efficiently in respect of converting its assets into salesif you have too much invested in your company's assets, your operating capital will be too high. If you don't have enough invested in assets, you will lose sales
In today’s economy the main goal of any hospital, community clinic or provider is to have financial viability to be able to produce enough revenue (Koleda & Oganisjana, 2015) to meet debts obligations, operating payments and if it’s possible to allow for development while maintaining quality care services to all patients. Accounting is the act to record of financial transactions to be able to present this information in various reports and analyzes. Finance is the actual management of the money. The good use of finance and accounting opens the possibility of financial viability. Meaning that the two working together and with a good administrator knowledgeable of their work will provide good results.