Are the financial ratios for the hospital improving? The Answer is: No
There is a essential use and limitations of financial ratio analysis, One must keep in mind
the following issues when using financial ratios: One of the most important reasons for
using financial ratio analysis is comparability and for this, a reference point is required.
Usually, financial ratios are compared to historical ratios of the business itself, competitors
financial ratios or the overall ratios of the industry in question. Performance may be
adjudged as against organizational goals or forecasts. A number of ratios must be analyzed
together to get a true and reliable picture of the financial performance of the business.
Relying on each ratio individually may not be a good strategy.
Year-end values may not be truly representative of the actual performance of the business
and hence, average values should be used when they are available. The limitations of
accounting methods also apply to financial ratio analysis. The selection and application of
accounting standards may result in different ratio values. Financial ratio analysis, in fact,
has a great use in management accounting which differs from financial accounting in being
an on-going, performance management exercise.
This summary is a review of the annual report and financial statements and the differences
between the audited and the unaudited statements. The financial ratios are examined to
determine if there has been improvement from 2008 to 2009 and to explain the cause. This
paper will also summarize the relationship between revenue sources and expenses and
explain the effect of revenue sources on financial reporting. The summary will also
