Financial Statement Analysis

Running head: FINANCIAL STATEMENT ANALYSIS

Financial Statement Analysis

Financial Statement Analysis

Introduction

The authors of Learning Team B choose two health organizations to compute the quick and current liquidity ratios, the DuPont ratio, profit margin, asset utilization, and financial leverage. The health organizations chosen are Happy Hospital and Health Management Associates. Within these two organizations the learning team will be discussing how differences in the industries and different measurements conventions affect presentations, and if one of the companies uses the cash basis of accounting, how would that differ from the accrual basis. The team will also be discussing in what ways the elements of the financial statements interact with one another. How might changing one of the financial statements affect the other financial statements? Why is it essential to understand the relationship between the financial statements?

In what ways do the elements of the financial statements interact with one another?

The objectives of Financial Statement presentation are to show an interrelated financial depiction of an entity's activities, to disaggregate information so that it is useful in evaluating an entity's future cash flows, and to present information about liquidity and financial flexibility of said entity. An organized financial picture means items in financial statements are clear and that the financial statements of an entity complement one another regularly. Financial statement analysis aimed at objectives such as assessing the amount, timing, and uncertainty of future cash flows requires financial information that is disaggregated into reasonably homogeneous groups of items. If items differ economically, users may wish to take that into account differently in predicting future cash flows (2009). An entity’s liquidity is important because it allows for users to gauge an entity’s capability to meet its financial...