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Ratio Analysis - Patton-Fuller Community Hospital

Autor:   •  July 25, 2016  •  Case Study  •  467 Words (2 Pages)  •  418 Views

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RATIO ANALYSIS

To: CEO

Date: October 3, 2015

From: Delores Brown

Subject: Patton-Fuller Community Hospital

Financial Ratio Analysis is the calculation of certain items on the financial statement that will show a relationship between figures so the ratio can analyze the business financial position and business performance. Different techniques have been applied simplifying the financial statements making them comparable.

Liquidity is relevant to the bankers, creditors, and employees.  Current ratio, quick ratio, cash ratio, and cash conversion cycle are relevant to liquidity. Profitability ratio includes net profit margin, gross profit margin, operating profit margin, return assets, and return on capital and equity. Solvency ratio are current debt to equity ratio, debt to capital ratio, and times earned interest ratio, and fixed charge and coverage ratio. Solvency should be interesting to bankers, investors, and managers. The solvency of organizations interest bankers. Investors will be interested in knowing the returns that they can earn on their investments. They will be interested in knowing the return on equity, dividend yield, and price to earnings ratio and the profit margins. Managers will want to know the efficiency of the organization. The asset utilization of the organization will be useful to a manager. Profitability ratio will be the interest of company managers and owners. A small business owner would have to show profitability to the investing partners.

Creditors will be interested in liquidity ratio, it will show the ability of the company to generate cash needed for bill pay. When companies apply for a loan banks examine the liquidity ratio; once the loan is approved some banks require to keep a minimum ratio. A company that can withhold itself during tough economic times then is worth taking an interest in.

Liquidity Ratio for Patton-Fuller Community Hospital (2009)

(Amounts in Thousands)

Current Ratio (Current Assets/Current Liabilities)

($128,867) / ($23807) = 5.4

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