FinancialRatios and Analyses Discussion
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FinancialRatios and Analyses Discussion
Financialstatement analysis entails recognizing the financial weaknesses andstrengths of an organization by creating a relationship between theprofit and loss account items and the balance sheet items. This helpsset a basis for making managerial decisions. On the other hand,operating indicator analysis involves quantified measurements thatenable an organization to explain and measure its progress in theachievement of organizational goals set and agreed upon by themanagement (Brigham & Houston, 2013). Operating indicatoranalysis helps in choosing the organizational plans, and the analysisis based on factors like the initiatives of regulatory bodies.
Healthcaremanagers find financial statement analysis important because it helpsthem in decision making, and formulating organization policies andplans according to the past performance. Investors find this usefulbecause from the performance evaluation, they can decide to selltheir shares, or continue being shareholders (Brigham & Houston,2013). Operating indicator analysis has profitability indicators,which help measure a hospital’s ability to meet the demand forservices and reimburse the investors. Liquidity indicators helpdetermine the ability to meet cash requirements cost indicators showthe mix of costs incurred by the hospital while utilizationindicators measure how fixed assets are utilized.
Thehealthcare organization under consideration is The Mount SinaiHospital, which faces many challenges in the analysis of itsfinancial statement due to the nature of the financial reports.Accounting mismanagement and errors due to distorted data, which isused in deriving financial ratios, face Mount Sinai Hospital (Brigham& Houston, 2013). This is because the managers assess theexpected and historical collections and business conditions to comeup with allowance for doubtful accounts, which can be inaccurateleading to false cash balances hence, the cash ratios are affected.Leaving out important aspects of a firm like the brand, intangibles,and relationships affect the financial statement analysis because theaccounts will lack the main success drivers leading to inaccurateratios and analyses. In Mount Sinai Hospital, substantialintercompany transactions and balances are eliminated. Theconsolidated financial statements lack the accounts of organizationsrelated to it through the board of management for example Mount SinaiProton Holding Company.
References
Brigham,E. & Houston, J. (2013). Fundamentals of financialmanagement. Mason, Ohio: South-
Western.