Financial Ratios Analysis and Comparison Paper

Financial Ratios Analysis and Comparison Paper

Financial statistics are often conveyed as financial ratios. Ratios are strategic management tools that are used to provide major stakeholders with a brief and organized way to examine the large data enclosed in financial statements (Suarez, Lesneski, & Denison, 2011). Financial ratios allow health care organizations to compare themselves to their opponents and to recognize its particular weaknesses and strengths. Understanding of an organizations financial position can permit them to quickly adjust to changes in reimbursement requirements and governmental regulations. Financial ratios are often used to measure a healthcare organization’s viability and financial condition. The majority of viable organizations goals involve operational planning and financial management. Financial managers who use ratio analysis to identify the strengths and weaknesses of their organizations can use the data to help develop strategies and proposals that will assist in determining how well the organization is performing over a specific time period. Financial managers may use financial ratio analysis to measure their organization’s outcomes against other organizations or make decisions regarding the impact and efficiency of the organization. Financial ratios fall into four major categories that concentration on particular aspects of financial condition: profitability, activity, liquidity, and capital structure ratios. It is vital that managers remember every financial statistics can be evaluated using a ratio and that financial ratios are time sensitive tools that they can be valuable when used as a basis to track and compare the organization’s performance against industry standards.

Profitability Ratios

In healthcare continuous changes in reimbursement and regulation requirements require managers to have an overall idea of the financial health of their organization. Profitability ratios answer the question of how profitable is the...