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Financial Ratios: Medical Group and Industry

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Attached is the financial ratios for Medical group as well as the industry.

1. Interpret the financial ratio of this company for 2009, 2010 and 2011
2. Compare the Medical hospital number for the year of 2009. 2010 with the industry ratios for the year 2009 and 2010. How does the hospital compare with the national norm?
3. Based on the financial ratios of the Medical hospital, how could the company improve? What would you suggest to the company?

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Solution Summary

The solution interprets the financial ratio for the Medical group as well as the industry.

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Answer to Question 1:
Current ratio shows the liquidity position of the company i.e., the ability of the company to repay its current debts out of current assets of the company. The medical group hospital had .9 current ratio in the year 2008 and dipped to .84 in the year 2009. However, it could improve its liquidity position in the year 2010 and 2011 as it increased to 1.34 in the year 2010 and 1.33 in the year 2011. Quick ratio is computed by subtracting inventory from current assets and divided by current liabilities to find out the liquidity position of the company. Since there is no inventory for the hospital, both the current ratio and quick ratios are same. Cash ratio denotes the amount of cash and other readily convertible marketable securities to repay the current liabilities. Medical hospital is ...

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