Financial Statement Analysis Financial Statement Analysis Abstract In order to assist managers in strategic decision-making regarding certain matters of the company and meet all financial reporting requirements, a thorough internal financial analysis of the organization should be conducted, as this will determine and influence the financial well-being of the organization. A financial analysis fulfills the following purposes: it assess the growth potential of the business, it measures profitability, assess overall financial strength, and indicates the trend of achievements just to name a few. Generally, internal regulations can provide significant benefits to the organization as a whole by reducing the possibility of maladministration, improve the quality of financial information, and detect/prevent error and fraud. This paper is to therefore, suggest a key insight about the financial health of the company based on the review of the financial statement, identify the current industry trend that has the most significant impact on the organization’s financial performance, and suggest a key strategy that can be used in order to improve the financial performance of the organization while recommending an approach to implement the suggested strategy (Baginski et al 2014) Universal Health Services is a leading, eminent, and one of the most respected health care management companies. The organization operates through its branches of acute care hospitals and ambulatory centers, and behavioral health facilities on a national scale. Furthermore, Universal Health Services has experienced tremendous growth in its performance in the last few years as indicated in the trend analysis of the company’s performance from year 2012, specified below, and thus maintains one of the strongest balance sheets (UHS, Inc.) The financial analysis indicates that there is a steady increase in total revenue, gross profit and operating expenses from the year of 2012 to 2013 and from 2013 to 2014. These increases can be attributed to the increase in their level of operations from year to year. Universal Health Services has posted growing net incomes despite growing competition and legislation within the healthcare industry. The company posted an increase of $67,487 from year 2012 to year 2013. In 2014 the net income grew by $34,610 to report a total net income of $545,343. Profitability Ratios 2012 2013 2014 Net Profit Margin 0.0637 0.07012 0.0676 Return on Assets 0.05407 0.06145 0.060766 Return on Equity 0.16343 0.15715 0.14597 An analysis of the profitability shows that the company experienced an increase in profitability from year 2012 to 2013, however in 2014 the profitability seemed to decelerate yet remained higher than 2012. The company’s total assets also increased from year to year thus substantiating to a growth-oriented organization. The increase in total assets further indicates that management has put more funds into investments contri ...

1. Financial Statement Analysis
Financial Statement Analysis
Abstract
In order to assist managers in strategic decision-making
regarding certain matters of the company and meet all financial
reporting requirements, a thorough internal financial analysis of
the organization should be conducted, as this will determine and
influence the financial well-being of the organization. A
financial analysis fulfills the following purposes: it assess the
growth potential of the business, it measures profitability,
assess overall financial strength, and indicates the trend
of achievements just to name a few. Generally, internal
regulations can provide significant benefits to the organization
as a whole by reducing the possibility of maladministration,
improve the quality of financial information, and detect/prevent
error and fraud. This paper is to therefore, suggest a key insight
about the financial health of the company based on the review
of the financial statement, identify the current industry trend
that has the most significant impact on the organization’s
financial performance, and suggest a key strategy that can be
used in order to improve the financial performance of the
organization while recommending an approach to implement the
suggested strategy
(Baginski et al 2014)
Universal Health Services is a leading, eminent, and one of
the most respected health care management companies. The
organization operates through its branches of acute care

2. hospitals and ambulatory centers, and behavioral health
facilities on a national scale. Furthermore, Universal Health
Services has experienced tremendous growth in its performance
in the last few years as indicated in the trend analysis of the
company’s performance from year 2012, specified below, and
thus maintains one of the strongest balance sheets
(UHS, Inc.)
The financial analysis indicates that there is a steady
increase in total revenue, gross profit and operating expenses
from the year of 2012 to 2013 and from 2013 to 2014. These
increases can be attributed to the increase in their level of
operations from year to year. Universal Health Services has
posted growing net incomes despite growing competition and
legislation within the healthcare industry. The company posted
an increase of $67,487 from year 2012 to year 2013. In 2014 the
net income grew by $34,610 to report a total net income of
$545,343.
Profitability Ratios
2012
2013
2014
Net Profit Margin
0.0637
0.07012
0.0676
Return on Assets
0.05407
0.06145
0.060766
Return on Equity
0.16343
0.15715
0.14597
An analysis of the profitability shows that the company
experienced an increase in profitability from year 2012 to 2013,

3. however in 2014 the profitability seemed to decelerate yet
remained higher than 2012. The company’s total assets also
increased from year to year thus substantiating to a growth-
oriented organization. The increase in total assets further
indicates that management has put more funds into investments
contributing to the growth in the operations levels of the
organisation.
Financial Health of the Organization
The key insight about the financial health of the
organization is in its liquidity, profitability and leverage. The
liquidity will assess the level of cash the organization has to
meet its instantaneous and short-term obligations. As the CEO,
maintaining and improving liquidity levels and cash in a
healthcare organization is extremely imperative for many
reasons to include withstanding day-to-day operations, capital
needs, working capital related to reimbursement, and business
unit funding just to name a few. Profitability is another
important factor, and is a key indicator of the firm’s financial
health and performance. Measured by ratios, the profitability
provides executives with a general idea of the financial health
of the company. For instance, the gross profit margin ratio can
evaluate the company’s returns in relation to its costs, should
rising costs be of a concern. Debt ratios, on the other hand, can
evaluate the company's ability to pay its long-term debt based
on assets.
Analyzing Liquidity
2012
2013
2014
Current Ratio
1.5743
1.3514
1.3655
Quick Ratio
1.4635

4. 1.25537
1.27408
Based on the above analysis, the company appears to
maintain great liquidity management as it ensures that there are
adequate current assets to pay the current liabilities as they fall
due.
Analyzing Leverage
2012
2013
2014
Debt/Equity Ratio
1.936
1.49035
1.338
Debt/Assets Ratio
0.6406
0.58275
0.55702
The Debt/ Assets Ratio is less than 1 through the 3 years. Since
the ratio is calculated as: (Debt Ratio= Total Debt / Total
Assets). It then follows that the assets exceed the liabilities in
each year. The company is therefore well-leveraged against
debt. The Industry debt ratio for 2014 is 0.88. The Debt to
Equity Ratio on the other hand is calculated using Debt as the
numerator. As the values are greater than 1, the debt exceeds
equity. This is however lower than the industry values of 2.2 in
2012, 2.05 in 2013 and 2.16 in 2014.
Consequently, the stakeholders should be extremely pleased
with the improving performance of the organization, as this
illustrates that the company can continue to post good returns
and can now make important business decisions that affect its
continued operations. The employees are a part of the
organization and should pride in the company’s success as well,
as it assures them of job security. Overall, evaluating how
suitably each of the company's stakeholders expectations are

5. met, grants a more stable and complete picture of performance
that can offer analytical insight and guidance for action.
(Universal Health Services 2015)
Trend Impact on Financial Performance
One key trend influencing the financial performance of
healthcare organizations is the introduction of the patient
protection and affordable care act. This act enables individuals
who could not afford insurance to obtain discounted insurance,
under the Obamacare laws. However, these new laws imposes
strict regulations on health care management. According to
Universal Health Services (UHS) 2014 financial statements, it
also consists of strict reimbursement requirements for the
healthcare providers.
Most healthcare organizations have had a difficult time
meeting the standards that are set by the new laws. In order for
UHS to avert being severely affected by the limitations of the
strict laws, the organization should continue to improve patient
satisfactory levels, and quality. Perhaps, the company should
look into standardizing all clinical vendors and source their
supplies from accredited and cost efficient suppliers
Furthermore, the CFO should seek capital investments that will
reduce the expense of delivering efficient care in order to
analyze capital spending. Should the executives plan for this
effectively, the better the chances will be for managing critical
financial challenges successfully
(Seidman 2005).
Key Strategy to Improve Financial Performance
Managing a hospital's balance sheet has become extremely
challenging due to overwhelming financial demands. The
change that is currently taking place in the healthcare industry
compels leaders to see ahead of the curve, as healthcare
organizations have to struggle with ever-increasing costs, a
highly competitive setting, and an environment that is engulfed
with a large amount of innovative new technologies. In order to
plan a successful path forward for the organization, CEOs and
senior executives must embrace change while implementing new

6. strategies. As such, the CFO should seek to minimize costs in
delivering health services while increasing revenue. To
accomplish this, there are several ways organizations can
maintain, or increase profitability. Nevertheless, it will require
two alternatives within their parameters which is to increase
revenue and/or cut expenses. For instance, one strategy may be
to reform the revenue cycle, as the revenue cycle is one of the
biggest areas of opportunities for hospital leaders simply
because it's completely within their control. Furthermore, if
coding and documentation are enhanced, that may result in
better reimbursements which actually reflects the value of
services provided. Improving the organization’s supply chain is
also a simple way to improve profitability simply by identifying
the most cost-effective, best-value devices, medications and
other physician preference items respectively
(Herman 2012).
References
Baginski, S., Bradshaw, M., Wahlen, J. (2014) Financial
Reporting Financial Statement Analysis, and Valuation: A
Strategic Perspective. 8th Ed. South-Western Cengage Learning.
Mason, OH.
Herman, B. (2012) 11 Ways Hospitals and Health Systems
Can Increase Profitability.
http://www.beckershospitalreview.com/finance/11-ways-
hospitals-and-health-systems-can-increase-profitability-in-
2013.html Retrieved Online.
Dr. Marcinko. E.D., Hetico, R.H. (2013). Hospitals &
Healthcare Organizations Management Strategies, Operational
Techniques, Tools, Templates, and Case Studies. CRC Press.
Boca Raton, FL
Seidman, F.K. (2005) Economic Development Finance. Sage
Publications, Inc. Thousand Oaks, CA.
Universal Health Services (2015) Thirty Five years of
leadership excellence universal health services, Inc. 2014
Annual Reports. Retrieved

7. from;http://ir.uhsinc.com/phoenix.zhtml?c=105817&p=irol-
reportsAnnualRetrieved Online.
UHS Universal Health Services, Inc. About Us.
http://www.uhsinc.com/about-us/ Retrieved Online.
Assignment 2: Using Financial Ratios to Assess Organizational
Performance
Due Week 6 and worth 240 points
Using the financial statements from your selected health care
organization in Assignment 1, develop a financial plan for the
next three (3) years.
Write a four to five (4-5) page paper in which you:
1. Suggest the financial ratio that most financial analysts would
use to evaluate the financial condition of the company. Provide
support for your rationale.
2. Speculate on the organization's ability to meet its financial
obligations as they come due. Provide support for your
rationale.
3. Based on your ratio analysis, determine whether the
profitability trends are favorable or unfavorable and explain
your rationale.
4. Using financial ratio analysis, predict whether or not the
company will be viable in five (5) years based on its
performance over the past three (3) years. Provide support for
your prediction.
Use at least two (2) quality academic resources. Note:
Wikipedia and other Websites do not qualify as academic
resources.