FOR ACE WRITES

Abstract

In order to assist managers in strategic decision-making regarding certain matters of the company and meet all financial reporting requirements, a thorough internal financial analysis of the organization should be conducted, as this will determine and influence the financial well-being of the organization. A financial analysis fulfills the following purposes: it assess the growth potential of the business, it measures profitability, assess overall financial strength, and indicates the trend of achievements just to name a few. Generally, internal regulations can provide significant benefits to the organization as a whole by reducing the possibility of maladministration, improve the quality of financial information, and detect/prevent error and fraud. This paper is to therefore, suggest a key insight about the financial health of the company based on the review of the financial statement, identify the current industry trend that has the most significant impact on the organization’s financial performance, and suggest a key strategy that can be used in order to improve the financial performance of the organization while recommending an approach to implement the suggested strategy

(Baginski et al 2014)

Universal Health Services is a leading, eminent, and one of the most respected health care management companies. The organization operates through its branches of acute care hospitals and ambulatory centers, and behavioral health facilities on a national scale. Furthermore, Universal Health Services has experienced tremendous growth in its performance in the last few years as indicated in the trend analysis of the company’s performance from year 2012, specified below, and thus maintains one of the strongest balance sheets

(UHS, Inc.)

The financial analysis indicates that there is a steady increase in total revenue, gross profit and operating expenses from the year of 2012 to 2013 and from 2013 to 2014. These increases can be attributed to the increase in their level of operations from year to year. Universal Health Services has posted growing net incomes despite growing competition and legislation within the healthcare industry. The company posted an increase of $67,487 from year 2012 to year 2013. In 2014 the net income grew by $34,610 to report a total net income of $545,343.

Profitability Ratios

An analysis of the profitability shows that the company experienced an increase in profitability from year 2012 to 2013, however in 2014 the profitability seemed to decelerate yet remained higher than 2012. The company’s total assets also increased from year to year thus substantiating to a growth-oriented organization. The increase in total assets further indicates that management has put more funds into investments contributing to the growth in the operations levels of the organisation.

Financial Health of the Organization

The key insight about the financial health of the organization is in its liquidity, profitability and leverage. The liquidity will assess the level of cash the organization has to meet its instantaneous and short-term obligations. As the CEO, maintaining and improving liquidity levels and cash in a healthcare organization is extremely imperative for many reasons to include withstanding day-to-day operations, capital needs, working capital related to reimbursement, and business unit funding just to name a few. Profitability is another important factor, and is a key indicator of the firm’s financial health and performance. Measured by ratios, the profitability provides executives with a general idea of the financial health of the company. For instance, the gross profit margin ratio can evaluate the company’s returns in relation to its costs, should rising costs be of a concern. Debt ratios, on the other hand, can evaluate the company's ability to pay its long-term debt based on assets.

Analyzing Liquidity

Based on the above analysis, the company appears to maintain great liquidity management as it ensures that there are adequate current assets to pay the current liabilities as they fall due.

Analyzing Leverage

The Debt/ Assets Ratio is less than 1 through the 3 years. Since the ratio is calculated as: (Debt Ratio= Total Debt / Total Assets). It then follows that the assets exceed the liabilities in each year. The company is therefore well-leveraged against debt. The Industry debt ratio for 2014 is 0.88. The Debt to Equity Ratio on the other hand is calculated using Debt as the numerator. As the values are greater than 1, the debt exceeds equity. This is however lower than the industry values of 2.2 in 2012, 2.05 in 2013 and 2.16 in 2014.

Consequently, the stakeholders should be extremely pleased with the improving performance of the organization, as this illustrates that the company can continue to post good returns and can now make important business decisions that affect its continued operations. The employees are a part of the organization and should pride in the company’s success as well, as it assures them of job security. Overall, evaluating how suitably each of the company's stakeholders expectations are met, grants a more stable and complete picture of performance that can offer analytical insight and guidance for action.

(Universal Health Services 2015)

Trend Impact on Financial Performance

One key trend influencing the financial performance of healthcare organizations is the introduction of the patient protection and affordable care act. This act enables individuals who could not afford insurance to obtain discounted insurance, under the Obamacare laws. However, these new laws imposes strict regulations on health care management. According to Universal Health Services (UHS) 2014 financial statements, it also consists of strict reimbursement requirements for the healthcare providers.

(Seidman 2005).

Key Strategy to Improve Financial Performance

Managing a hospital's balance sheet has become extremely challenging due to overwhelming financial demands. The change that is currently taking place in the healthcare industry compels leaders to see ahead of the curve, as healthcare organizations have to struggle with ever-increasing costs, a highly competitive setting, and an environment that is engulfed with a large amount of innovative new technologies. In order to plan a successful path forward for the organization, CEOs and senior executives must embrace change while implementing new strategies. As such, the CFO should seek to minimize costs in delivering health services while increasing revenue. To accomplish this, there are several ways organizations can maintain, or increase profitability. Nevertheless, it will require two alternatives within their parameters which is to increase revenue and/or cut expenses. For instance, one strategy may be to reform the revenue cycle, as the revenue cycle is one of the biggest areas of opportunities for hospital leaders simply because it's completely within their control. Furthermore, if coding and documentation are enhanced, that may result in better reimbursements which actually reflects the value of services provided. Improving the organization’s supply chain is also a simple way to improve profitability simply by identifying the most cost-effective, best-value devices, medications and other physician preference items respectively

(Herman 2012).

References

Baginski, S., Bradshaw, M., Wahlen, J. (2014) Financial Reporting Financial Statement Analysis, and Valuation: A Strategic Perspective. 8th Ed. South-Western Cengage Learning. Mason, OH.