Identify potential real options that might arrive in this firm’s business.
• Are these options industry specific or company specific?
• How would these options affect their capital budgeting process?
• Justify your answers.
1). Financial statement analysis refers to the evaluation and analysis of the financial statements that belong to a particular company in order to facilitate the extraction of specific information that is utilized to make certain decisions. Am familiar with the financial reporting standards that Ford Motor group uses to present its financial statements. The company utilizes the International Accounting Standards for its foreign branches while the US branches follows the Generally Accepted Accounting Principles. Health care organizations present their financial statements depending on the country that they are operating in. In the US, most hospitals follow the Management Accounting System for Hospitals (MASH). The system provides a framework for tracking and also analyzing the health facility services that are applicable together with the resources, services and the relevant costs involved in hospitals. It’s a system that operates under 12 interrelated MS Excel spreadsheets (Partners for Health Reformplus, 2004). Hospitals turnover are not so much compared to most manufacturing units as their prime objective is to provide health care services and they don’t absolutely operate for profits.
2). Tenet healthcare corporation is a holding company that manages several hospitals in California, Texas and Florida. It has over 56,948 health workers and 665 administrators. Its head offices are located in Dallas, Texas. The total number of beds declined from 14,352 in 2008 to 13,601 in 2009 (Tenet Healthcare Corp-Form 10K, 2010).
The net operating revenue for Tenet Healthcare Corp has displayed an improving trend since 2005 to 2009. The operating expenses have also increased steadily for the same period.
However the net operating income has increased from a negative income of $830 million in 2006 to $228 million in 2009.
3). The major problem that the
|Tenet Healthcare Corp||2009||2008|
|Current Ratio||Total Current Assets/Total current liabilities||1.39||1.39|
|Asset turnover||Sales/Average total assets||1.13||1.05|
|Net assets turnover||Net assets / total sales||0.08||0.09|
|Times interest earned||EBIT/Annual Interest Expense||-0.46||-0.13|
|Debt to total Asset||Debt/Assets||0.54||0.58|
|Interest cover||EBIT/Annual Interest Expense||-0.46||-0.13|
|Profit margin on sale||GP/sales||0.06||0.04|
|R.R return on assets||EAT/Total Assets||0.03||0.01|
|R.R com stock equity||Profit after taxes/Shareholders equity||0.33||0.54|
|Earnings per share||Profit after taxes-pref div)/No. of comm O/S||1.54||1.48|
|ROE||Return On Equity (ROE)||0.33||0.54|
|ROA||Return on average Assets||1.13||1.05|
They indicate how profitable the company is. This ratios shows the profit margin on sales. In 2009 the sales growth trend increased by 6% while in 2008 it was 4%.
Liquidity ratios reflects the company’s ability to raise immediate cash incase its generator influenced. The current ratio for the company in 2009 and 2008 was 1.39%. Firms may announce bonuses for other logistics reasons. Poor liquidity may lead to depression and eve
Debt to Assets ratio
The ratio of debts to equity 0.54 is on average which means that the debts are almost fifty percent of the entire equity. The interest cover registered a reduction in its Tenhealth purchases. The return on equity for the company is also reducing since the year.
Profitability ratios are mostly indicative as they utilize the meals issued under generosity. Financial statement analysis and provides accurate figures and weather positions (Garrison, Noreen & Brewer, 2009).
There exists a problem of finding the right standards for ratio analysis. The ratios analyze the performance of a company and also the performance of other groups. It’s not possible to compare the results of different companies as the companies have different sizes as well as different rates of growth and expansion. Certain companies may also be at different stages of growth and it’s not practical to compare them. Companies that have taken out loans and their liquidity status are shaky stand better chances of employee (Bodie, Kane & Marcus, 2008)
The accrual concept of accounting recognizes the value of the goods being transacted while the transaction will operate fully and posted in all levels of accounting. But the problem comes in when the other clients fail to pay for their goods that have been entered on the books. All the entries have to be revised and other statements redrawn to include the changes.
The Management Accounting System for Hospitals (MASH) in the US works well for theme. . The system provides a framework for tracking and also analyzing the health facility services that are applicable together with the resources, services and the relevant costs involved in hospitals. It’s a system that operates under 12 interrelated MS Excel spreadsheets (Partners for Health Reformplus, 2004). Hospitals turnover are not so much compared to most manufacturing units as their prime objective is to provide health care services and they don’t absolutely operate for profits. But the problem is that these companies have foreign branches that also have their own set of accounts. It would be a tall order to expect only one person before living the house.
Partners for Health Reformplus (2004) Management Accounting System for Hospitals (MASH) Manual, Bethesda, MD: The Partners for Health Reformplus Project, Abt Associates Inc.
Tenet Healthcare Corp-Form 10K (2010)
Louis & Gapenski, Healthcare Finance, ISBN 978-1-56793-425-0
Bodie, Z., Kane, A., & Marcus, A. J. (2008) Investments (7th International Ed.) Boston: McGraw-Hill. 303
Garrison, R., Noreen, W. & Brewer, P. (2009) Managerial Accounting, New York, NY: McGraw-Hill Irwin. 65 -70
|Tenet Healthcare Corp|
|Net Operating Revenues||9014||8585||8083||7676||7557|
|Basic earnings per share||0.44||0.15||-0.08||-1.76||-0.6|
|Balance Sheet Items|
|Working capital (C/assets -c/liabilities)||689||760||512||1100||1216|
|Long term debt||4272||4778||4771||4760||4784|
|Total Current Assets||2472||2709|
|Total Current liabilities||1783||1949|