Essay on "Financial Analysis"
Essay 3 pages (862 words) Sources: 3
[EXCERPT] . . . .
Financial ratios can therefore be used in providing meaningful information for comparing companies that operate within similar industries.The factors to consider when interpreting results of ratio analysis
There are several factors to consider when interpreting ratio analysis. Key among them includes inflation, the type of industry, the financial year and duration as well as the seasonality of the firm's performance.
Sample ratio analysis calculation for a healthcare organization
Cost per discharge
Cost per discharge is a system level metric used in healthcare to refer to the costs that are related to the operations at the inpatient side of the business and is never associated in any way with the administrative cost.
Cost per discharge =Total cost/Discharges
For instance is a major hospital made $2 million the previous financial year with a discharge of 800 patients, the Cost per discharge would be $2,500. The low the value of cost per discharge, the better the management of the healthcare facility.
Managed Care ratios
In a managed care setting, the health care providers may use cost as well as utilization data in monitoring the managed care contracts. The monitoring and control ratios are important in this regard. Examples of such ratios are cost per patient day, variable cost per patient day, cost per discharge, labor to total cost ratio, revenue to cost per discharge ratio, cost per case-mix adjusted discharge as well as standard cost ratio.
Cost per patient day =Total cost/patient days
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For instance the total cost of maintaining a patient at a hospital is $10,000 and the patient stays in the hospital for 20 days, then the cost per patient day equals $500.This is pretty high.
Labor to total cost ratio =Labor cost/Total cost
If the labor cost is $5,000 with the total cost being $25,000, then the labor to total cost ratio is 0.2.
Conclusion
The use of financial ratios in the healthcare facilities is very important. It is therefore necessary for these ratios to be employed using the most accurate data available and with consideration of other factors such as inflation and seasonality of a firm performance.
References
Eichler HG, Kong SX, Gerth WC, Mavros P, Jonsson B. (2004)Use of cost-effectiveness analysis in health-care resource allocation decision-making: how are cost-effectiveness thresholds expected to emerge?. Value Health. 2004 Sep-Oct;7(5):518-28.
Finkler, SA.,Ward, DM ] and Baker, JJ (2007).Essentials of Cost Accounting for Health Care Organizations. Jones & Bartlett Learning,
Flex Monitoring Team (2005). Financial Indicators for Critical Access Hospitals. Available online… READ MORE
Quoted Instructions for "Financial Analysis" Assignment:
“Ratio Analysis
Discuss the value of ratio analysis in decision making for health care organizations. Include at least two ratios from each major group from any health care company that is selected.
Provide examples with calculations and evaluate the meaning of the results related to the financial health of the organization.
Explain the factors that affect the results.
Describe the overall concept and purpose of ratio analysis.
Include two ratios from each major group.
Explain factors to consider when interpreting ratio analysis results.
How to Reference "Financial Analysis" Essay in a Bibliography
“Financial Analysis.” A1-TermPaper.com, 2012, https://www.a1-termpaper.com/topics/essay/financial-analysis-specifically/2281921. Accessed 27 Sep 2024.
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