Write a 4-6 page paper in which you discuss the value of ratio analysis in decision making for health care organizations. Complete the following in your paper:
o Discuss the meaning of ratio analysis in healthcare.
o Pick only one (1) ratio from EACH major group from the financial statements. (e.g. Current ratio,
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Write My Essay For MeROE, Debt to equity, ALOS)
Major Groups: o
o Liquidity ratios (Current ratio, Days Cash-on-Hand, Quick Ratio)
o Profitability ratios (ROE, ROA, Total Margin, Operating Margin)
o Leverage/Capital Structure Ratios (Debt ratio, Equity ratio, Debt to Equity Ratio)
o Nonfinancial Ratios (Occupancy rate, payer mix, ALOS, Expense per discharge, FTE per bed, HMO penetration)
o Discuss one (1) ratio (from EACH major group) using the following criteria:
o What is the meaning of each ratio?
o Evaluate the meaning of the ratio related to the financial health of the health care organization. Show the calculations.
o Explain the factors that affect the results related to the financial health of the organization.
You can also utilize the sample Help4UHMO Organization financial statements (located under week 6) or a real-life health care organization to evaluate by researching their financial statements. Show relevant calculations.
- Format your paper consistent with APA guidelines.
- Provide a minimum of two (2) cited sources in your paper. Properly cite in APA format
SAMPLE SOLUTION
Ratio analysis is a commonly used tool in financial analysis for healthcare organizations. It allows for the evaluation of the organization’s financial performance and health by comparing different financial metrics and ratios. This type of analysis can provide valuable insights into the organization’s liquidity, profitability, leverage, and other non-financial measures.
One ratio from the liquidity group that can be useful for healthcare organizations is the current ratio. This ratio measures the organization’s ability to pay its short-term obligations by comparing its current assets to its current liabilities. A current ratio of 1.0 or higher indicates that the organization has enough liquid assets Order a Customized and Comprehensive answer Now
For example, if a healthcare organization has $500,000 in current assets and $300,000 in current liabilities, its current ratio would be calculated as follows:
Current ratio = $500,000 / $300,000 = 1.67
This indicates that the organization has a strong liquidity position, with enough liquid assets to cover its short-term liabilities.
One profitability ratio that can be useful for healthcare organizations is the return on equity (ROE) ratio. This ratio measures the organization’s ability to generate a profit from its equity capital. A high ROE ratio indicates that the organization is generating a good return on its equity capital, which is a Order a Customized and Comprehensive answer Now
For example, if a healthcare organization has $1,000,000 in equity and a net income of $100,000, its ROE ratio would be calculated as follows:
ROE ratio = $100,000 / $1,000,000 = 10%
This indicates that the organization is generating a 10% return on its equity capital, which is a good sign for shareholders.
One leverage ratio that can be useful for healthcare organizations is the debt to equity ratio. This ratio measures the organization’s level of debt compared to its equity capital. A high…Order a Customized and Comprehensive answer Now
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