# Healthcare Organization Ratio AnalysisEssay

Pages: 4 (1285 words)  ·  Bibliography Sources: 6  ·  File: .docx  ·  Level: College Senior  ·  Topic: Health  ·  Written: November 30, 2018

SAMPLE EXCERPT . . .
This ratio is a metric for the organization’s efficiency in the management of its assets to produce profits during a financial period. Bearing in mind that the sole objective of the organization’s assets is to generate revenues and generate profits, ROA is beneficial to both management and investors to perceive how effectively the firm can transform its investment in assets into profits (Bragg, 2012).

The return on assets ratio of McKesson Corporation is computed as follows:

## Return on assets = Net income / Total assets

• 2017: 5,153 / 60,969 = 8.45%
• 2016: 2,310 / 56,523 = 4.09%
The return on assets ratio of the organization increased significantly from 4.09 percent in 2016 to 8.45% in 2017. This implies that for every dollar of assets invested in the company, there was an income generated of 0.041 cents in 2016 and this figure rose to 0.085 cents in 2017. This indicates that the company’s profitability level increased almost twofold in the past financial year, which indicates a strong financial position.

### Leverage / Capital Structure Ratios

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Leverage or capital structure ratios are financial metrics that investigate the amount of capital in the company in terms of debt. These ratios assess the capability of a firm to meet its financial obligations. These ratios are significant bearing in mind that firms are dependent on a mixture of both debt and equity to facilitate the financing of their operations. In this regard, ascertaining the debt amount held by a firm is beneficial in assessing whether it has the ability to pay off its debt obligations when they become due. One of the key leverage ratios is the debt ratio. It is also referred to as the debt to equity ratio. A high debt to equity ratio largely specifies that a corporation has been forceful in financing its growth with debt. This can give rise to volatile earnings on account of the extra interest expense. If the firm's interest expense develops too high, it may increase the firm's probabilities of a default or bankruptcy (Lanz, 2012).

The debt to equity ratio of McKesson Corporation is computed as follows:

## Essay on Healthcare Organization Ratio Analysis Assignment

### Debt to equity ratio = Total debt / Total equity

• 2017: 49,696 / 11,273 = 4.41
• 2016: 47,515 / 9,008 = 5.27

### Non-Financial Ratios

Non-financial ratios are quantitative measures of the performance of a firm that is not expressed in terms of monetary units. Non-financial performance measures can act as primary pointers of forthcoming financial performance and can offer discernment as to the firm’s effect on stakeholders and society. They can offer more extensive perceptions of the internal workings of the firm. In addition, the key benefit of these non-financial metrics is that they can be employed to comprehend the reason as to why particular financial outcomes took place and what the organization needs to change to improve the financial metrics (Rist and Pizicca, 2014). McKesson has information solutions in 65 percent of America’s largest hospitals and more than 50 percent of the nation’s health systems. It has a presence in more than 40 percent of the United States’ payor organizations, comprising more than 80 percent of the biggest HMOs, and approximately 20 percent of the nation’s home healthcare organizations.

References
1. Bragg, S. M. (2012). Business ratios and formulas: a comprehensive guide (Vol. 577). Hoboken: John Wiley & Sons.
2. Ittelson, T. R. (2009). Financial statements: A step-by-step guide to understanding and creating financial reports. New Jersey: Red Wheel/Weiser.
3. Lan, Z. J. (2012). 16 Financial Ratios for Analyzing a Company’s Strengths and Weaknesses. AAII Journal.
5. Rist, M., & Pizzica, A. J. (2014). Financial ratios… [END OF PREVIEW] . . . READ MORE

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