Question

Ratio analysis is considered a method of performing an in-depth assessment of the financial performance of an organization.

-Identify the four categories of ratios used to evaluate health care organizations.

-List examples of each category of ratio.

Provide at least one reference

Answer 1

INTRODUCTION-:

Ratio analysis is a method to find easy indication of the financial position of the organization in various areas. It is a quantitative analysis of the company's financial information. There are various ratios used to know the real position of the any organization.

RATIOS USED FOR HEALTH CAE ORGANIZATION-:

1.ASSEST MANGEMENT RATIO-:

A major part of the expenditure is in the high tech equipment of the organization. Assets management ratio help to know, how much revenue they will be able to generate from those expensive assets, to the managers of the organization. It helps to calculate how effectively the assets will generate revenue. the formula used is revenue divided by total assets.

2. PROFITABILITY RATIO-:

It helps the oraginzation to know the financial health of the company, because things are changing within seconds in this world. The formula used is gross profit divided by revenue. The higher this ratio the higher will be the capacity of the company to generate profit in relation to the costs.

3. DEBT RATIO-:

When the money is in defecit and uncertain the banks lend moneyto the organization. This ratio helps to analyse the paying back capacity of any oraganization. Debt ratio helps to know the paying back of an organization of the long term debt in relation to its assets. Helps to diffrentiate different projects based upon their degree of riskness. The formula used is total liabilities divided by total assets.

4. LIQUIDITY RATIO-:

The ability of the oranization to pay its short term debt obligations. Theeir focus is on the current assets and current liabilities of the organization. The most used ration is the current ratio or the quick ratio. It helps to determine how much money is available to pay off the current liabilities. The formula used is current assets divided by current liabilities.

These were the four different ratios used in health care organization to know better about its financial position.