FINANCIAL STATEMENT ANALYSIS - 1375 Words

FINANCIAL STATEMENT ANALYSIS (Term Paper Sample) Content: Topic Studentà ¢Ã¢â€š ¬Ã¢â€ž ¢s name Professorà ¢Ã¢â€š ¬Ã¢â€ž ¢s name Course title Date 1) Health Management Associates (NYSE: HMA) is a for-profit corporation which operates hospitals in the Southern United States, with headquarters in Florida. The organization offers a wide range of services including capital, people and subject matter expertise to hospitals as well as investing capital to renewal of hospitals. HMA offers its services to 71 hospitals across 15 states in the US. From the financial statement analysis of the organization for the years 2009, 2010, 2011 and 2012, the following information was obtained. Period ended 2009 2010 2011 2012 Total Revenue($ millions) 4536.11 4467.41 5087.6 5878.24 Gross Profit($ millions) 3898.44 3763.99 4311 4974.47 Operating income ($ millions) 457.2 286.82 312.4 301.48 Net income($ millions) 138.18 150.07 178.71 164.27 Total assets($ millions) 4604.1 4910.09 6004.19 6400.79 Total liabilities ($ millions) 4248.92 4389.19 5235.05 5396.87 Total equity($ millions) 355.18 520.89 769.14 1003.92 It can be seen that the total revenue, Gross profit, Net income and total equity for the organization have been improving over the four years. Over the four years, the following can deduced from the financial statements of the organization Gross margin=84.33% Operating margin=4.43% Net profit margin=0.04% Return on investment=0.05% Quick ratio=1.45 Current ratio=1.72 From the above information, it can be concluded that Health Management Associates has a healthy financial performance. This means that the organization is both profitable and financially stable. From the gross profit trend over the four years, there has been a subsequent increase hence the organization is projected to make higher profits in the future. (HEALTH MANAGEMENT ASSOCIATES, INC.; Reportal, 2013). Financial statement of a company helps in understanding the performance of a company in the past hence helping in prediction of future performance. Financial statement analysis includes review and analysis of all the companyà ¢Ã¢â€š ¬Ã¢â€ž ¢s accounting reports to understand its past, present and projected future performance. This enables in sound decision making. One key insight about the financial health of a company is the trend of different key items in the financial statement. Observing trend lines for revenues, cash, account receivables, gross margin, debt and net profits over a past period of time gives a clear picture of the companyà ¢Ã¢â€š ¬Ã¢â€ž ¢s financial health. The health of the company can receive different reactions from various stake holders. Employees are able to know the stability and profitability of the company hence they can weigh job security and possibility of pay rise. Investors are able to decide on what to do with their investments. Based on the financia l statement analysis, they can decide to sell their stock or buy more. Shareholders are able to determine the profitability of the business from financial statement analysis and this helps them in decision making. (Financial reporting, financial statement analysis, and valuation: Stickney, Brown Wahlen, 2007). 2) The health care industry is facing a healthcare stakeholder consolidation due to revenue pressure. As operating margins are continuously narrowing, healthcare organizations are faced with revenue constrains. To counter this, these organizations are participating in mergers and hospital acquisitions with a view of spreading the financial risks across the merger as well as sharing reduction of operation costs. This trend has had an impact to many healthcare organizations including Health Management Associates. It has led the consolidation of healthcare stakeholders. Healthcare systems are coming together and demanding bigger price increases. However, insurers are not willing to increase their premium but instead they are excluding most expensive practitioners and hospitals from their network. This leads to narrower networks but on the hand it is creating out-of-network bills for...