e have discussed the basic components of financial statements to include the balance sheet, income
statement and statement of cash flows. We will focus on additional analysis for discussion #8.
Interpretation of financial statements has strengths and weaknesses. One strength is that you have
quantitative data (inflows/outflows) that demonstrates organizational effectiveness in relation to finance.
The weaknesses of financial statements are that they do not illustrate underlying issues. Examples of
potential weaknesses can include inflationary impacts, ignoring non-financial matters such as social and
environmental factors and not being “future thinking.” Financial statements should be used for financial
analysis, but executives must consider weaknesses that are not illustrated on the balance sheet, income
statement and the statement of cash flows. One of the key tools to evaluate the financial status for a given
health care organization is to understand ratio analysis (page 406) from a definition and formula
perspective. The overall results of financial analysis which is usually evaluated quarterly for a given health
care organization is presented with strengths and weaknesses in mind for growth and improvement.
1. What is average profit margin for health care organizations? Research inpatient and outpatient margins
for your answer. Are they increasing or decreasing? Why?
2. Review page 406 of your text in relation to keys ratios. Evaluate the financial statements for HCA
(balance sheet, income statement and the statement of cash flows) using some of the key ratios on page
406 in conjunction with discussion #7. Is HCA performing well? Explain using at least one paragraph.
3. Describe at least three potential limitations for HCA that may not be illustrated on their financial