This paper will develop a financial plan for Universal Health Services (UHS). First, it will suggest the financial ratio that most financial analysts would use to evaluate the financial condition of the company. Next, this paper will speculate on UHS’ ability to meet its financial obligations as they come due. Furthermore, it will determine whether the profitability trends are favorable or unfavorable accompanied with an explanation. Finally, this paper will predict whether or not UHS will be viable in five years based on its performance over the past three years.
Using the Current Ratio
Taking a look at the Universal Health Services financial statements, a financial analyst would consider several ratios …show more content…
The current ratio is a liquidity ratio, and is defined as the current assets divided by the current liabilities. Again, Baker & Baker explain that this ratio is a measure of short-term debt-paying ability (2014, p. 123). Furthermore, other experts describe the current ratio as merely the measure of liquidity of a company at a certain date; it should be analyzed in the context of the underlying trend of the ratio over a period of time. Generally, UHS would aim to maintain a current ratio of at least 1 to ensure that the value of their current assets cover at least the amount of their short term obligations (liabilities). Nonetheless, a current ratio of greater than 1 provides additional cushion against unanticipated contingencies that may arise in the short-term (Accounting.com, n.d., para 5). As a result, this researcher has conducted a calculation of UHS’ current ratio over two years for comparison, and to show a positive …show more content…
In the same vein, UHS’ diluted earnings per share were based on the weighted average number of common shares outstanding during the same year. However, these earnings were adjusted to give effect to common stock equivalents. During the same three year period, UHS’ net income attributable to basic and diluted earnings increased from $442,949 to $510,439. In the end, the total diluted earnings per share increased from $ 4.53 to $ 5.42 (2015, p. 136). In total, these numbers show favorable growth and a financial performance that is ever improving. Continuing in this fashion, UHS is predicted to only continue to profit and perform in a similar fashion. Overall, the positive growth and increase in shares brands this company as one that will continue its growth and profit for the next five