Discuss the value of ratio analysis in decision making for heath care organizations.
o Include at least two ratios from each major group from the financial statements from your company or a health care company you select.
o Provide examples with calculations and evaluate the meaning of the results related to the financial health of the organization.
o Explain the factors that affect the results.
FINANCIAL RATIO ANALYSIS IN DECISION MAKING:
HEALTH CARE ORGANIZATION
Financial statements show the financial condition of a company. Basic financial statements include the Balance Sheet, Income Statement, and Statement of Cash Flows. The Balance Sheet shows a picture of a company at a given point in time in terms of its assets, liabilities, and owners' equity. The Income Statement (also called profit and loss statement) shows results of operations in terms of sales, expenses, and the resultant income. The statement of cash flows enumerates the cash receipts and cash disbursements for a specified interval of time which is usually 1 year (Keown, 2002).
Financial statement analysis is facilitated through computation of financial ratios. They could manifest or indicate strengths and weaknesses of a company. However, according to Fraser (2001), financial ratios should be used with caution and common sense, and should also be used with other elements of financial analysis.
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The solution discusses the value of ratio analysis in decision making for health care organizations.