Question

In: Finance

what questions to ask company managers when doing a financial analysis on a healthcare organization?

what questions to ask company managers when doing a financial analysis on a healthcare organization?

Solutions

Expert Solution

There are three major areas to be considered while doing a financial analysis on a healthcare organisation:

(a) Cash Flow Coverage Ratio:

Why: The cash flow coverage ratio can be particularly important for businesses such as hospitals and medical practices because such organisations must often wait substantial periods of time to obtain financial reimbursement from insurance companies or government agencies, having sufficient cash flow and good cash flow management is essential to their financial survival.

(b) Long-term Debt to capitalization ratio:

Why: The long-term debt-to-capitalization ratio is an essential leverage ratio for evaluating companies that have significant capital expenditures, and therefore substantial long-term debt, such as many healthcare organisations. This ratio, calculated as long-term debt divided by total capital, is a variation on the popular debt-to-equity ratio, and essentially indicates how highly leveraged a company is in relation to its total financial assets. A ratio higher than 1 can indicate a precarious financial position for the company, in which its long-term debts are greater than its total capital. Analysts prefer to see ratios of less than 1 since this indicates a lower overall financial risk level for a company.

(c) Operating Margin:

Operating margin is one of the important profitability ratios considered by analysts and investors in equity evaluation. A company's operating profit margin is the amount of profit it makes from the sales of its products or services after deducting all production and operating expenses, but prior to consideration of the cost of interest and taxes. Operating margin is key in determining a company's potential earnings, and therefore in evaluating its growth potential. It is also considered to be the best profitability ratio to assess how well-managed a company is, since management of basic overhead costs and other operating expenses is critical to the bottom line profitability of any company. Operating margins vary widely between industries and should be compared between similar companies.


Related Solutions

There are two important questions financial managers should ask: What level of assets are needed to...
There are two important questions financial managers should ask: What level of assets are needed to operate? How to finance those assets or raise capital? (The firm can use equity or debt financing or combination of both.) Select a publicly traded company (make sure your selected company is different than your classmates’) based in KSA and look (in terms of percentage) how it finances its operations using equity or debt financing. In addition, in Saudi Arabia Vision 2030 stated SMEs...
There are two important questions financial managers should ask: What level of assets are needed to...
There are two important questions financial managers should ask: What level of assets are needed to operate? How to finance those assets or raise capital? (The firm can use equity or debt financing or combination of both.) Select a publicly traded company (make sure your selected company is different than your classmates’) based in KSA and look (in terms of percentage) how it finances its operations using equity or debt financing. In addition, in Saudi Arabia Vision 2030 stated SMEs...
There are two important questions financial managers should ask: What level of assets are needed to...
There are two important questions financial managers should ask: What level of assets are needed to operate? How to finance those assets or raise capital? (The firm can use equity or debt financing or combination of both.) Select a publicly traded company (make sure your selected company is different than your classmates’) based in KSA and look (in terms of percentage) how it finances its operations using equity or debt financing. In addition, in Saudi Arabia Vision 2030 stated SMEs...
When conducting SWOT analysis, what are some of the questions that one should ask to identify...
When conducting SWOT analysis, what are some of the questions that one should ask to identify strengths and weaknesses?
The managers of Happy Bank ask for a performance/risk analysis, and ask you to answer the...
The managers of Happy Bank ask for a performance/risk analysis, and ask you to answer the following questions.    Happy Bank’s balance sheet is as follows: Assets:                                                                           Ave. Duration                    Securities              4% rate            $300 million                1 year Long-term Loans 7% rate           $ 900 million                5 years       Total Assets                             $1,200 million Liabilities & Equity Short-term Deposits 2% rate       $600 million               1 year Certificates of Deposit 3% rate      400 million               5 year       Total Liabilities                       $1,000  million Equity                                                 200 million    Total Liab.& Equity                     $1,200 million What is the...
Financial statement analysis- Theory questions What does it mean when a company has good financial performance?...
Financial statement analysis- Theory questions What does it mean when a company has good financial performance? Which financial statement ratios indicate good financial performance and how so? What does it mean when a company has good investment potential? Which financial statement ratios indicate good investment potential and how so? Finally what is the difference between good financial performance and good investment potential?
how can healthcare managers cash, operational, and capital budgeting? what financial statement analysis are most important...
how can healthcare managers cash, operational, and capital budgeting? what financial statement analysis are most important for the healthcare industry to evaluate actual versus expected performance and provide indicators of future performance?
What are the three basic questions Financial Managers must answer?
What are the three basic questions Financial Managers must answer?What are the three major forms of business organization?What is the goal of financial management?What are agency problems, and why do they exist within a corporation?What major regulations impact public firms?
What are some good S.W.O.T. and Force Field Analysis questions to ask a presenter?
What are some good S.W.O.T. and Force Field Analysis questions to ask a presenter?
What is the role of the HIM (Health Information Manager) in a healthcare organization – when...
What is the role of the HIM (Health Information Manager) in a healthcare organization – when it comes to revenue and finances?
ADVERTISEMENT
ADVERTISEMENT
ADVERTISEMENT