Did you see the work?

Using Financial Ratios to Assess Organization Performance

Edwin Togba

Strayer University King of Prussia

Dr. James Coon

HSA 525 Health care Finance

November 12, 2013

Suggest the financial ratio that most financial analysts would use to evaluate the financial condition of the company. Provide support for your rationale.

I will suggest these as the five and most commonly used ratio by most financial analysts to evaluate the financial condition of the company. (1) Debt – equity ratio is a qualification of a firm’s financial leverage estimated by dividing the total liabilities by stockholder’s equity. This ratio indicates the proportion of equity and debt used by the firm to finance its assets. Example CTC scanner in a hospital or a rented property. Rationally how much of the stockholder equity is expanded in acquiring these assets. (2) Current ratio is a liquidity ratio which estimate the ability of the firm to pay back short- term obligations when due. This ratio is also known as cash assets ratio. A higher current ratio indicates the higher capability of the firm to pay back its debt. Current ratio is computed by dividing current assets / current liabilities. From 2009 2010 2011 for universal health service

These are the assets and liabilities:

3,964,400/1,989,500 7,527,900/5, 929,400 7,665,200/5,099,200

= 1.99 or 2 = 1. 26 or 1.3 = 1.5 or 2

From a rationale point of view, I will support my position by saying that the company did well for the periods that were compared. Normally the industrial average is in the range of 2 to 1, and the computation above give a clear indication as to how the company stand in this regard.

(3) Return on equity is the amount of net income returned as a percentage of the shareholders equity. Moreover, the return on equity estimate the profitability of a corporation by revealing the amount of profit generated by a company with money invested by shareholders. This is express as percentage which is computed by net income divided by shareholder equity. Rationally “shareholders are owners of a company. They purchase stock because they want earn a good return on their investment without undue risk exposure”. ( Brigham & Ehrhardt financial management pg 9, 2011). I will support my stand here by saying the primary objective of any company or corporation is to maximize shareholders value. As a result, it the return on assets falls below expectation, shareholders will be concern.( 4)