University of Phoenix
November 22, 2010
Financial Statement Analysis
Financial statements in the health care industry provide the organizations with vital information. Areas that use the available financial statements are creditors, management, investors as well as the Internal Revenue Service (IRS). Managers who know simple financial statement concepts can be enough but when basic statements are used the managers must know everything about accounting. The following essay will give insight into how financial statements are used in the health care industry.
Differences in Industries Affects on Presentations
When looking at different industries and the financial statements associated to the business there are little comparisons. For example, when looking at the measure of leverage or debt ratio and compare; the different industries will obviously have different standards of operations as well as acceptable operating parameters. One industry may see a high debt ratio as acceptable as the only way to expand. Whereas, other industries my see the high debt ratio as weakness or trouble. The valuations used must be compared to the same industry to gain valuable insight into the industry that will give management concrete value to make managerial decisions.
Cash VS Accrual Basis
Cash and accrual accounting methods are both used in accounting to keep track of income and expenses. The difference between cash and accrual accounting is the timing of the transactions. The cash method does not count the income until received and the expenses until they are paid out (Ward, 2010). The accrual method counts the income as soon as the transaction happens and the expenses are counted as soon as received (Ward, 2010). The cash method will give an estimation that is accurate regarding how much cash the company has. The disadvantage is a misleading view of long-term profitability. The advantage of accrual is showing a more... [continues]
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