Health Management Associates



Assignment 2: Financial Statement Analysis

Introduction

The present study focuses on the financial analysis of the Health Management Associates. This section of the study covers the different financial ratios which not only help in determining the present status of an organization but also help for the prediction of the next five years.

Discussion

Financial Ratio for the Financial Analyst

Financial ratio is used for the evaluation of the financial condition of an organization. All the stakeholder of an organization (company owner, stockholders, investors, directors etc) uses the financial ratios for the ratio analysis for the future performance of an organization. Health management association should use the following ratio for the evaluation of the financial performance though the help of the historical figures. Four type of ratio analysis is used to compare the financial analysis. These ratios are liquidity ratio, profitability ratio, asset management ratio, debt management ratio, earning per share, dividend per share and profitability ratio (Baker, 2011).

Debt management ratio, dividend/market value ratio and profitability ratio used by the financial analyst in order to know about the company's status.

Debt management ratio

This ratio measures the ability of the firms in order to pay the long term debt. Financial analysts examine the debt ratio and decide about the investment in an organization. The higher the ratio of an organization, the greater risk associated to the firms operation which indicates not to invest in an organization. Debt to equity ratio, capitalization ratio, interest coverage ratio and cash flow to debt ratio are used for the analysis of the debt condition of the company (Baker, 2011).

Profitability Ratio

This ratio provides the management performance to the analysts. Through the help of this ratio, analysts easily determine that whether the company is in profit or loss. High profit means low risk of investment decision while low profit relate ...