Health Care Ratio Analysis

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Recommended: Essentials of Financial statement Analysis

information and may not be enough to meet present and future needs of a company. Many companies are unique in size, operation, location, and management. Thus, comparing the companies in same industry with such uniqueness might not provide useful comparable information. For example, comparing a company renting its plant and a company purchasing its own assets will be irrelevant in terms of financial analysis. Some companies might increase the current ratio by increasing the debt before the year-end in order to make their balance sheet look better for that year. Thus, ratio analysis doesn’t reflect the company’s tricky activities during ratio calculations and financial analysis by using different ratios. Since the financial ratios are just numbers …show more content…

This topic is important because it helps to create the company’s ratio analysis, with the application of financial statements, provides guidance about company’s financial and operational status as well as the strengths and weaknesses. This is important to health care organization because it help to evaluates the past performance, present condition, and prospects, it also aids in company’s planning, controlling, forecasting and overall decision making processes. Due to its simplicity and flexibility, ratio analysis is most useful tool in analyzing company’s status and prospects, therefore, if used properly by considering the limitations and taking precautions, ratio analysis will provide the maximum benefits to the users. Recommendations Ratio and financial statement analysis is the simplest method because the financial statements are broken down into ratios. However, due to the limitations of ratio analysis, some precautions that are necessary are mentioned below. 1. Even though, financial statement analysis is simple and widely used tool, every users should have minimum knowledge of accounting and the calculation to obtain certain ratios. 2. Investors should analyze financial statements rather than going by ratios before investing in companies or businesses. 3. Knowledge is always useful and it is better to seek advice from financial professionals for those users who are not familiar and are not able to analyze information from financial

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