Financial Ratios Analysis and Comparison Paper

Financial Ratios Analysis and Comparison Paper

Introduction

This paper will be analyzing and comparing financial position of local hospital in past three years. Secondly it will discuss the role played by financial ratios and will provide comments for how these organizations can imporve their position in context to national norms. As a middle manager of health care organization I am responsible to present a report to senior financial officer for the comments that are related to national norms. The hospital that will be analyzed is MedStar Harbor Hospital.

Discussion Analysis

Financial ratios reflect the relationship between the various accounts (revenue and the amount of assets, cost and size of accounts payable, etc.). The analysis procedure with the help of financial ratios implies two stages: the actual calculation of financial ratios and their comparison with baseline values. The basic values ??of the coefficients can be selected by the industry average values ??of the coefficients, the values ??for previous years, the values ??of the coefficients of the main competitors, etc (Bodie & Alex, 2004).

The advantage of this method is its high "standards." Worldwide, the main financial ratios are calculated by the same formulas, and if there are differences in the calculation, these factors can easily lead to the common values ??with the help of simple transformations. In addition, this method eliminates the effects of inflation, since virtually all the coefficients are the result of dividing some articles reporting on the other, ie, the study is not the absolute values ??that appear in the financial statements, and their relationships.

Despite the convenience and relative ease of using this method, the financial ratios do not always provide an opportunity to uniquely determine the state of affairs of the company. As a general rule, a strong contrast ratio of the average industry specific value or the value of this coefficient is a competitor indicates a problem in need of more detailed analysis, but does not indicate that the company clearly has a problem (Ehrhardt & Brigham, 2008). A more detailed analysis using other methods can detect a problem, but it may also explain the deviation of the coefficient of the peculiarities of business enterprises, not leading to the emergence of financial difficulties.

For Internet companies regularly calculate financial ratios is a useful tool for tracking the current state of the enterprise. With its rapidly growing network of their relative nature of the market allows you to eliminate the influence of many factors contributing to the distortion of the absolute values ??of performance reporting? Financial ratios are calculated on the basis of financial reporting. Sources may include: Balance (Balance sheet), Profit and Loss (Income statement), statement of retained earnings (Statement of retained earnings), Report of Cash Flows (Cash flow statement). Financial ratios are used:

lenders to assess credit risk;

investors in order to form hypotheses about future profits and dividends;

Financial managers to obtain information on the impact of managerial decisions.

Financial ratios can evaluate many aspects of business, but usually not used separately from the financial ...