Financial statement analysis Essay Example | Topics and Well Written Essays - 500 words

Financial statement analysis - Essay Example The general rule is for a current ratio to be good it must be above 1.0. Both the current ratio and quick ratio of the company are excellent. The net margin of Happy Hospital is 6.49%. A net margin measures the profitability of a company. In order to determine whether a net margin is good or not one must consider the industry in which the company participates. A good database to find the industry ratios for different business industries is the Dun & Bradstreet database. If a company has a net margin that is higher than the industry standard this company is performing above the industry norm. Another element to consider is whether a company is a non-profit organization or for-profit company. The net margin in a non-profit organization is irrelevant since the strategy of the company is to break even. On the other hand for-profit organizations seek to maximize its profitability. The asset utilization of Happy Hospital was 63.56%. Firms seek to have high asset utilization because this me tric illustrates how much revenues are being generated with the assets of a firm. The financial leverage of Happy Hospital is 10.22%, while the financial leverage of St. Agnes is 86.40%. The financial leverage ratios show how much debt a company is using to finance its operation. The financial leverage position of Happy Hospital is much lower than St. Agnes Hospital.