HEALTH CARE FINANCE

Health Care Finance

Health Care Finance

Profitability Ratios

Profitability ratios are the projection of how successfully the firm is managing its assets and debts. Actually, profitability ratios measure the ability of the firm to generate earnings or how successfully the firm has generated earnings over a period of time. Profitability ratios are the indicators of the success or failure of the firms' activities.

ROA = Net Income + Interest Expenses/Total Assets

ROA 2010 = 8.0%

ROA 2009= 12.0%

The return on assets ratio shows that how effectively the assets of TW Watson Limited are working to generate profit. According to the situation of the above calculated figures, we can say that the return on assets has decreased. This is a negative sign for the company as its earnings are deccreasing in accordance with the assets.

ROE = Net Income + Interest / Common Equity

ROE 2010 = 11%

ROE 2009 = 11%

Return on equity ratio is a comparison of the amount of earnings and the shareholders' equity. This ratio shows the investors that how much the company has earned in contrast to the amount of shareholder' equity. The trend in the return on equity is neutral. This means that the earnings are consistent in comparison to the shareholders' equity.

Sales Margin = (Sales - Operating Expenses) / Sales

Sales Margin 2010 = 7%

Sales Margin 2009 = 7%

Liquidity Ratios

Liquidity ratios determine the firms' ability to pay back her debt in time. This is a major influencing factor in the performance of any firm. The basic premise of the liquidity ratios is to determine the liquidity of the firm. In this section, we will focus on the current ratio only as it is the main determinant of a firms' liquidity.

Current Ratio = current assets / current liabilities

CR 2010 = 1.13

CR 2009= 1.21

From the above figures, it is clear that the trend in the current ratio is decreasing which means that TW Watson Limited is facing shortage of resources to pay-off liabilities in the current year i.e. 2010. Since the current ratio of 1 means that the firm has £1 for every £1 of the current liability. This is the most admirable situation. In this case the current ratio is decreasing which means that the company has no sufficient funds to pay off its liabilities. This is also not good for the company in future.

Turn Over Ratios

Turnover ratios define the performance of the company in terms of turnover from assets, ...