Assessment #4: Ratio Analysis Assessment #4: Ratio Analysis (15%) Write a 4-6 page paper in which you discuss the value of ratio analysis in decision ma

Assessment #4: Ratio Analysis (15%)

  • Write a 4-6 page paper in which you discuss the value of ratio analysis in decision making for health care organizations. Complete the following in your paper: 
  • Discuss the meaning of ratio analysis in healthcare.
  • Pick only one (1) ratio from EACH major group from the financial statements. (e.g. Current ratio, ROE, Debt to equity, ALOS)
  • Major Groups:
    • Liquidity ratios (Current ratio, Days Cash-on-Hand, Quick Ratio)
    • Profitability ratios (ROE, ROA, Total Margin, Operating Margin)
    • Leverage/Capital Structure Ratios (Debt ratio, Equity ratio, Debt to Equity Ratio)
    • Nonfinancial Ratios (Occupancy rate, payer mix, ALOS, Expense per discharge, FTE per bed, HMO penetration)
  • Discuss one (1) ratio (from EACH major group) using the following criteria:
    • What is the meaning of each ratio?
    • Evaluate the meaning of the ratio related to the financial health of the health care organization. Show the calculations.
    • Explain the factors that affect the results related to the financial health of the organization. 

You can also utilize the sample Help4UHMO Organization financial statements (located under week 6) or a real-life health care organization to evaluate by researching their financial statements. Show relevant calculations.

  • Format your paper consistent with APA guidelines.
  • Provide a minimum of two (2) cited sources in your paper. Properly cite in APA format.

You will be graded base on the following rubric:

Income Statement

Help4U HMO
Income Statement and Change in Net Assets
Year Ended June 30, 2015
(in thousands)
Premiums Earned$26,682
Interest and Other Income242
Total Revenue$28,613
Salaries and Benefits$15,154
Medical Supplies and Drugs7,507
Provision for Bad Debt19
Total Expenses$27,395
Net Income$1,218
Net Assets, Beginning of Year$900
Net Assets, End of Year$2,118

Non-Financial Indicator Data

Help4U HMO Non-Financial Indicators
Number of Occupied Beds26350
Total Beds32000
Total Length of Stay per Discharge1000
Total Discharged Patients250
Total FTE’s700
Total Patient Days2500

Balance Sheet

Help4U HMO
Balance Sheet
June 30, 2015
(in thousands)
Cash and Cash Equivalents$2,737
Net Premiums Receivable821
Total Current Assets$3,945
Net Property and Equipment$5,924
Total Assets$9,869
Liabilities and Net Assets
Accounts Payable Medical Services$2,145
Accrued Expenses$929
Notes Payable$141
Current Portion of Long-Term Debt$241
Total Current Liabilities$3,456
Long-Term Debt$4,295
Total Liabilities$7,751
Net Assets (Equity)$2,118
Total Liabilities and Net Assets$9,869

Industry Benchmarks

Industry Benchmarks
Total Margin3.80%
Return on Equity25.50%
Return on Assets8.00%

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