Question

if a not for profit hospital needs a new Electronic Record system how can the organizations financial statement be used to make the funding decision? what ate some additinal financial factors an investor owened hospitak might need to take into consideration before buyong a new EMR?

Answer 1

Please find the answers below,

As the company is not for profit, there are other financial parameters, which can be considered from financial statements.

Like the ratios below:

Liquidity Ratios

Liquidity ratios measure a company's ability to pay off its short-term debts as they come due using the company's current or quick assets. Liquidity ratios include the current ratio, quick ratio, and working capital ratio.

Solvency Ratios

Also called financial leverage ratios, solvency ratios compare a company's debt levels with its assets, equity, and earnings to evaluate whether a company can stay afloat in the long-term by paying its long-term debt and interest on the debt. Examples of solvency ratios include debt-equity ratio, debt-assets ratio, and interest coverage ratio.

Coverage Ratios

These ratios measure a company's ability to make the interest payments and other obligations associated with its debts. The times interest earned ratio and the debt-service coverage ratio are both examples of coverage ratios.

Market Prospect Ratios

These are the most commonly used ratios in fundamental analysis and include dividend yield, P/E ratio, earnings per share, and dividend payout ratio. Investors use these ratios to determine what they may receive in earnings from their investments and to predict what the trend of a stock will be in the future.

In addition to the ratios above, which show the operating effeciency of the organisation and leveraging, there are few other factors which should be considered, like the hospital has a minimum no. of visitors to recover the additional fix costs.