HCA/270 Financial Matters
Financial Statement Analysis
Financial Statements serve a major purpose in any business or organization. The main purpose of financial statements, according to HBS Management (Singer, 2007), is for a business to determine how well they are doing as a company. Financial statements also tell the organization’s stockholders and investors how profitable the company is. Lenders use financial statements to see if a company can afford to pay their bills on when they are due. Financial statements provide lots of information for all the people involved in a company. Health care financial statements provide the same information to be given but fall under a different set of rules from other industries, the computation of ratios differently (McLean, 2003). If these differences are not recognized, both the financial analyst and those who use the analysis can severely misunderstand. There are three main types of financial statements.
Balance sheets provide a detailed account of a company’s assets, liabilities, and shareholder’s equity (US Securities and Exchange Commission. 2007). Assets show everything a company owns that has value. Assets include cash, investments, things that can be sold also known as physical property (trucks, equipment, inventory), and things that cannot be sold (patents and trademarks). The liability of a balance sheet shows what the company owes to others. Liabilities include bank loans, payroll, environmental cleanup costs, and taxes. The shareholder’s equity is the company’s net worth. The net worth is what the company has if all the assets are sold and all the liabilities are paid. Any money left over belongs to the company’s shareholders. All of the information included in a balance sheet is important to the financial statement because the information helps show what the company is worth and how much they are responsible for.
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