Using financial ratio to assess organizational performance

Using financial ratio to assess organizational performance

Introduction

In business world, firm's financial performance is matter of concern for various stakeholders of business. To effectively analyze the performance of the company financial ratios are used. These ratios help identifying the performance of the business in comparison with various areas such as profitability of the business, liquidity, debt and various other ratios. These ratios help stakeholder of business in identifying their financial performance more effectively. Financial ratios are used to analyze and compare the company performance from its previous performance. There are different types of ratio involved in financial ratios. The aim of the financial ratios is to evaluate the effectiveness and efficiency (Fridson & Akvarez, 2011). This paper focuses on financial performance of Universal Health Services Inc. Various ratios are used to assess the financial performance of the business.

Discussion

Business stakeholders use financial ratios to assess the business performance. It used by various stakeholders of the business such as employees, owners, suppliers and shareholders. They assess through financial ratios to analyze that whether the business is performing favorable direction or unfavorable direction (Wahlen et al., 2011). By analyzing firm performance appropriate actions are taken. In this section financial ratios will be applied on three year data of Universal Health Services Inc.

Universal Health Services Inc (UHS)

Universal Health Services Inc. (UHS) is among largest healthcare services in United States in area of hospital management. In addition to their health management business they also act as an advisor to its Universal Health Realty Income Trust which is its real estate investment trust. UHS operates in United States, US Virgin Islands and Puerto Rico. UHS is headquartered in King of Prussia, Pennsylvania. There are more than 65,000 employees working in UHS. It was established in 1978 by Alan B. Miller. With the passage of time company proved its quality of services in hospital management and spread all over the United States by acquiring and building new hospitals and healthcare institutes. Currently UHS is among fortune 500 companies and listed on New York Stock exchange NYSE:UHS.

It is observed that at the end of fiscal year 2012 UHS generated $6,961.4 million which is 3% increase ac compared with previous years. Among the revenue of the business stated above, $942.6 million was operating profit of the company and it is 5.1% increased if it is compared with fiscal year 2011 (Universal Health Services, 2013). Detailed financial analysis of the business is done in later part of this assignment.

Financial analysis

Financial statement analysis is important in analyzing and comparing the financial position of the company. It also helps in identifying misstatements in financial statement of the company (Koen & Oberholster, 1999). Financial statements are important for huge range of users. First of all it is required by the executives and managers of the business to analyze the wealth of the business. It also assists managers in taking decisions for business. Financial statements are used by shareholders of the business for evaluating ...