HSA 525 Week 6,
SOLUTION 14-2, 14-3
HSA 525 Week_6_Assignment 2
The financial ratios are used for the purpose of determining the financial performance of an organization. There are various financial ratios which are taken into consideration by the financial analysts. The most important ratio which shall be taken into consideration is the net profit ratio. The net profit ratio of an organization is a particular ratio which is determined by the organization by deducting the expenses incurred by it from the revenues generated by it.
If the net profit ratio of an organization is lower then, it can be said that, the organization does not have the ability or control over its expenses to a larger level. The organization compares its net profit with the competitors. The organization which is higher net profit ratio is considered to be better in comparison to the competitors of the organization (Shim & Siegel, 2007). There are various organizations which earn a lot of revenue but, if an organization will not have control over its expenses then, there will be the situation that, the organization will not be in the position to have profitability. The success of an organization is judged by its profitability other than anything else.
Meeting Financial Obligations
The organization taken into consideration in relation to the present paper is Universal Health Services Inc. For the purpose of determining the ability of an organization to meet its financial obligations, it is important to consider the current ratio. The current ratio is calculated by dividing the current assets of the organization by its current liabilities. The current ratio of an organization should be 2:1.
The current ratio determines the ability of the organization to meet its debt obligations. In relation to the organization, the current ratio for the period of last 3 years has to be taken into consideration. In the year 2010, the current ratio of the organization was 1.55:1. In the year 2011, the current ratio of the organization was at the level of 1.63:1. In the year 2012, the current ratio of the organization was 1.57:1.
This shows that, the organizational current ratio is not up to the level of ideal current ratio in any of the past three financial years. Moreover, in the year 2012, the organizational