Ratio Analysys Essay

851 Words Dec 12th, 2014 4 Pages
Liquidity Ratio: describe a firm or facility’s capability to pay their currents obligation. It relays the entity availability of cash and other assets to cover accounts payable, short-term debt, and other liabilities. (Finker 2007). Most firms or companies whether new or established need to have a certain amount of liquidity on hand to pay their bills on time. The two most common ratio used to measure liquidity are current ratio and quick ratio.
Current Ratio = current assets / current liabilities
BH current ratio for 2012 = 675426 /195179 = 3.4
BH current ratio for 2013 = 698812 / 178421 = 3.9 The result of the ratio compared for 2012 and 2013 shows Broward health had a steady flow cash and will be able to meet their obligations on
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Debt to equity ratio measure entity borrowing power if the ratio is too high creditors are supplying a substantial portion of all resources used by the organization. If the ratio is too low, it makes it more difficult for an entity to borrow. Debt to ratio is calculated as Current liabilities plus Long-term debt over Net assets.
Total debt to equity = current liabilities + long term debt / net assets
BH total debt to equity for 2012 = $195,179 + $255,048 / $754,837 = .59
BH total debt for 2013 = $178421 + $244,697 / $813,549 = .52
Their debt to equity ratio for entity is lower than 2012 is a positive sign for Broward Health.
The next Solvency ratio is interest coverage. Interest coverage provides information entity ability to meet its interest coverage.
Interest coverage =Cash flow from operating activities + Interest expense / Interest expense
BH interest coverage for 2012= (05180+12697)/12697=1.4
BH interest coverage for 2013= (28053+11776)/11776=3.4
The Broward Health interest coverage increase from 2012 to 2013 by two which means that the organization is in good financial stability and can meet its current interest payments. Factors that can affect the results are the cash flows and the amount of interest rates.
Efficiency Ratio used as an indicator of whether the organization is running efficiently. There are three ways to measure efficiency ratio: patient revenue per day, day's receivables, and revenue to assets.

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