Financial Ratios In Health Care

1006 Words 4 Pages
Ratios are important for measuring for comparing one hospital to another and financial statements are necessary to compare from another. Accountants, management, and health care administrators are to refer to ratios as a guide to develop a broader convey of the financial standing of the organization. Liquidity ratios have a big part of accounting and health care organizations, and the purpose of them to assess how well the organization is doing in terms of assets. Then, solvency, efficiency, and profitability are major types of ratios for how the health care organization evaluates or wants to increase profit. Lastly, equations and calculations for discounts from invoices are important to consider when completing for patients. Ratios help to …show more content…
To common size cash is to compare it to total assets. Also, the key number is needed to find the common size ratio for comparison. In addition, the key number can be found on the balance sheet which entails total assets or total equities, liabilities, and net assets together. The calculations are to be completed for the ratio pertaining to the asset to the balance sheet for comparison. Then, for each ratio can be calculated for each liability and net asset to link to total liabilities and net assets. According to (Finkler, S.A., Ward, D.M. & Calabrese, I.D., 2013), once you have calculated the common size ratios, you can use them to associate your organization to itself over time, to specific competitors, and to industry-wide statistics. It ultimately helps for accountants, management, and health care administrators of how well or bad their organization is doing and to see what steps for improvement. Common size ratios are relevant for health care organizations and long-term use for a starting point of unusual variations in the …show more content…
The intention of efficiency ratios is to measure the efficient handling of receivables, payables, and total assets. The three major types of efficiency ratios are receivables ratios payable ratios, and total asset turnover. How receivable ratio is used by when the money is received the organization would be paying less interest or would be earning more interest, (Finkler, S.A., Ward, D.M. & Calabrese, I.D., 2013). As a result, collecting the receivables punctually is a must. The efficiency ratios can be seen in an equation to be calculated as days in accounts receivable = net accounts receivable/ (net patient revenue)/ 365. This is a simple ratio to calculate and break down its elements to comprehend its diverse parts. The second efficiency ratio is payables which can be calculated to payables. In addition, the days in accounts payable ration gives measure of how many days it takes an organization to pay its bills. The calculation involved of days in accounts payable takes the form as the receivables ratio, (Finkler, S.A., Ward, D.M. & Calabrese, I.D., 2013). The balance sheet provides the accounts payable balance. Then, taking the annual operating expenses less depreciation and dividing by 365 will total after numerator and denominator yielded of amount of days for an organization to pay their