Ratio Analysis University of Phoenix

HCS/571 Finance Resource Management Sept 24, 2013Rosetta Stringfellow, MBA, BSRatio Analysis Ratio analysis is a widely used managerial tool that compares one number with another to gain insights that would not arise from looking at either of the numbers separately. Ratio analysis is used to examine and interpret the relationship between two numbers on a financial statement. This is done so that the managers of a facility can determine whether or not the organization needs to change any of their financial variables in order to remain competitive in their market. The ratio analysis converts numbers into meaningful comparisons which managers can use*…show more content…*

(Finkler et al., 2007)

For Norwalk Hospital this ratio translates as:

The difference between current ratio and quick ratio is not dramatic, but it gives insight to how much cash is really available at a given time. Outside investors such as creditors and shareholders are interested in solvency ratios. These ratios express long-term health of a company and the ability of the company to meet its payment obligations over a long period of time (usually over five years). One solvency ratio is the Total Debt to Equity ratio. (Finkler et al., 2007)

For Norwalk Hospital this ratio is expressed as: According to Finkler et al. (2007), a debt to equity ratio of 1 indicates liabilities of $1 for each dollar of net asset. As the Total Debt to Equity ratio becomes smaller the future of business operations of the company becomes healthier. Norwalk Hospital maintains this ratio below that of the average in the healthcare industry (average of 3), but is moving up by a small amount. The management team could consider taking a look at 2012 operations and identifying the triggers that moved this ratio higher to

HCS/571 Finance Resource Management Sept 24, 2013Rosetta Stringfellow, MBA, BSRatio Analysis Ratio analysis is a widely used managerial tool that compares one number with another to gain insights that would not arise from looking at either of the numbers separately. Ratio analysis is used to examine and interpret the relationship between two numbers on a financial statement. This is done so that the managers of a facility can determine whether or not the organization needs to change any of their financial variables in order to remain competitive in their market. The ratio analysis converts numbers into meaningful comparisons which managers can use

(Finkler et al., 2007)

For Norwalk Hospital this ratio translates as:

The difference between current ratio and quick ratio is not dramatic, but it gives insight to how much cash is really available at a given time. Outside investors such as creditors and shareholders are interested in solvency ratios. These ratios express long-term health of a company and the ability of the company to meet its payment obligations over a long period of time (usually over five years). One solvency ratio is the Total Debt to Equity ratio. (Finkler et al., 2007)

For Norwalk Hospital this ratio is expressed as: According to Finkler et al. (2007), a debt to equity ratio of 1 indicates liabilities of $1 for each dollar of net asset. As the Total Debt to Equity ratio becomes smaller the future of business operations of the company becomes healthier. Norwalk Hospital maintains this ratio below that of the average in the healthcare industry (average of 3), but is moving up by a small amount. The management team could consider taking a look at 2012 operations and identifying the triggers that moved this ratio higher to

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