Financial Condition Analysis Report for ABC Healthcare Corporation
Executive Summary
For more than 30 years, ABC has been setting the standard for home medical equipment. The ABC Healthcare Corporation, of which Maria Gomez is the creator and president, owns hospitals, ambulatory surgical centers, urgent care facilities, and outpatient clinics. I work at ABC as one of Maria’s top-performing financial analyst managers. She has asked me to review various financial records and offer suggestions on increasing shareholder value.
Company History
Since 1983, ABC Medical Care has been paving the way for in-home medical technology. Elwood Miller initially founded ABC as a home oxygen provider, but it has since grown to become the largest independent provider of home healthcare and respiratory products in Virginia. We assist many patients in getting the equipment and care they deserve.
Our commitment to patient success, industry-leading client care, and teamwork set us apart from other suppliers. Our success results from fulfilling these expectations and giving each interaction between patients and healthcare providers considerable value. We accomplish this by strongly emphasizing people, cycles, and innovation. Our family is the most important resource we have. Our staff at ABC comprises skilled professionals with compassionate souls and, in particular, partners. Everyone is aware of how important we are to the lives of our patients.
As a result, our staff members support one another, band together, and share in the company’s success. We combine best-in-class clinical tools, industry-leading technology, and programming with running our business. Our foundation gives our team the tools to be productive in their profession and contribute to patient care.
Analyzing finances
The management team of ABC Healthcare will conduct a financial study. The financial summaries and proportions will be audited as part of this investigation to ascertain the organization’s true state and value. It will be detailed how liquidity, longer-term dissolvability, evaluating the executives, and productivity influence the relationship in an exhaustive review of the monetary proportion investigation. There will be a breakdown of ABC’s strengths and weaknesses. An inquiry comparison with a pattern that illustrates the association’s trajectory will be a part of this audit. Competitive Comparative analysis will demonstrate the company’s current position in the market relative to friends and competitors by analyzing general organizational performance.
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Temporary liquidity Actual Ratio
Rapid Ratio
The ability of an association to easily pay its lender over a short period is the focus of short-term solvency or liquidity ratios. The evaluation method determines a company’s market and book value. While Quick Ratio, also known as analysis, only examines resources that can be converted into money in 90 days or less, the present proportion considers all resources. From 2016 to 2018, ABC’s current ratios grew. A corporation can meet its short-term obligations if there is an increase like this. After some time, rising current ratios indicate that a company is becoming more adept at what it does, while falling current ratios may indicate the opposite. Over the same period, the industry average showed a more notable capability for profit. In 2018, ABC Healthcare’s snappy proportion also increased at this point, and the business as usual was of roughly similar significance. Both can convert more resources and will do so in practice.
Long-term viability
The focus of long-term solvency or liquidity ratios is on an association’s ability to calculate obligations over a longer time frame. Long-term appropriateness considers using debt to buy new resources or a company’s ability to raise money. The total obligation percentage considers all liabilities to the specified sum for each lessee.
The ratio of times revenue obtained is used to determine an organization’s long-term viability. Using this technique, you may determine a company’s ability to pay interest and debt management payments over a long period.
Total Debt Ratio =
| Total assets – Total equity | |
| Total assets |
Times Interest Earned Ratio =
| EBIT | |
| Interest |
| Year | |||
| 2016 | 2017 | 2018 | |
| Inventory Turnover Ratio | 3.2529 | 3.2738 | 3.7368 |
| Industry Internet services & Social media | |||
| Receivables Turnover Ratio | 16.41 | 15.68 | 15.64 |
| Industry Internet services & Social media |
ABC considerations in medicine Analysis of Debt to Equity, Times Interest Earned Ratio, and Comparison to Industry Average. The ABC debt-to-equity ratios decreased between 2016 and 208.
A business obligated to value proportion below one is even more financially stable. The ratio of time interest earned by ABC Healthcare during that time was 0.008. Each reported year, their investment ratio increased by over 100%. The prolonged discoverability of ABC medical care is significant.
Assets Turnover
By comparing net deals and typical complete resources, the asset turnover ratio, a productivity ratio assess an organization’s ability to generate deals from its resources. Ultimately, this ratio demonstrates how well a company can use its resources to close agreements. This investigation focuses on the inventory turnover ratio, which gauges how frequently a stock is sold over time. The receivable turnover percentage also focuses on how frequently a business can convert its accounts receivable into cash throughout a period.
Receivables Turnover =
| Sales | |
| Accounts receivable |
Inventory Turnover =
| Cost of goods sold | |
| Inventory |
| Year | |||
| 2016 | 2017 | 2018 | |
| Inventory turnover ratio | 12.92 | 12.87 | 14.11 |
| Receivables turnover ratio | 16.941 | 15.68 | 15.64 |
From 2016 to 2017, ABC’s healthcare inventory turnover ratio decreased, but from 2017 to 2018, it increased. Between 2016 and 2018, the turnover ratio of receivables decreased. In the best-case scenario, ABC’s capacity to turn over stock and receivables is typical, given its medical care item offering and the money it indicates.
Profitability
The profit-for-resources ratio, or ROA, measures how successfully a company can use its resources to generate benefits over time. The net revenue proportion reveals the number of agreements that remain after the company has covered all expenses. The ROA ratio for ABC Healthcare decreased from 2016 to 2017 but increased from 2017 to 2018. Similar trends were seen in the profit margin, which fell from 2016 to 2017 before rising from 2017 to 2018.
Return on assets =
| Net Income | |
| Total Assets |
Profit Margin =
| Net Income | |
| Sales |
| Year | |||
| 2016 | 2017 | 2018 | |
| ROA | 4.08 | 2.78 | 3.10 |
| Profit Margin | 0.91 | 0.63 | 0.69 |
Market Price
The value-income ratio reveals the price the market is willing to pay for a stock, given its current profit. The proportion of events’ revenue acquired, also known as the interest inclusion proportion, is a measure of inclusion that determines the appropriate amount of pay that can be used to pay interest charges in the future. The most popular valuation metric is the PE ratio, which offers a simple way to determine whether a stock is overvalued or undervalued.
PE =
| Price per share | |
| Earnings per share |
Market-to-book ratio=
| Market value per share | |
| Book value per share |
| Year | |||
| 2016 | 2017 | 2018 | |
| Debit to equity ratio | 1.83 | 1.61 | 1.43 |
| Times interest ratio | 1.69 | 0.98 | 1.21 |
Analysis of Financial Statements
Numerous financial facts demonstrate ABC Medical Care’s financial viability from 2016 to 2018. For simplicity, the record will focus on an Income Statement, Balance Sheet, and Statement of Cash Flows.
The annual revenue of ABC Medical Care was $167.94B in 2018, up 9.66% from 2017. Working compensation for 2019 was $1.112B, down $22.98% from 2018. The 2018 working salary was
$1.444B, an increase of 36.15% over 2017. 2019’s net gain was $0.855 billion, a 48.42% drop from 2018. Compared to 2017, the overall pay for 2018 increased by 355% to $1.658B.
Changes in assets and liabilities that you can see on the financial statement are also reflected in the incomes and expenses on the pay stub, which determines the organization’s gains and losses.
ABC’s total resources for 2019 increased by 3.99% to $39.172B from 2018. The total resources for 2019 increased by 3.99% from 2018 to $39.172B. Resources totaled $37.67B in 2018, up 6.66% from the previous year. $2.993B, or 1.86% less than in 2018, was the investor value for 2019. Investor value for 2018 increased by 47.74% from 2017 to $3.05B.The income justification provided by ABC Medical Care provides further information regarding the financial resources listed on an accounting report. It is related to the total compensation listed on the pay proclamation while distinct from it. Etc.
The annual total compensation/misfortune reported by ABC Medical Services on the pay announcement for 2018 was $1.616B, up 343.34% from the previous year.Net pay/loss for 2019 was $0.854B, a decline of 47.14% from 2018.
Conclusion
Nobody’s financial overview tells the entire tale. However, when combined, they offer financial experts incredibly fantastic information. Additionally, data is the speculator’s best tool for making savvy contributions.
Reference
AmerisourceBergen Income Statement 2005-2020: ABC. (n.d.). Retrieved January 24, 2021, from the https://www.macrotrends.net/stocks/charts/ABC/amerisourcebergen/income- statement?freq=Q
ABC | Accounts Receivable Turnover Chart and History 2009-2020 | DiscoverCI. (2020).
Retrieved January 24, 2021, from https://www.discoverci.com/companies/ABC/accounts- receivable-turnover
AmerisourceBergen: ABC – Ebit. (2020). Retrieved January 24, 2021, from https://tradingeconomics.com/abc:us:ebit
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Question 
Create a 3-5 page report that analyzes financial ratios for a company, uses the data to tell the financial story of that company, and concludes with a recommendation on whether the company would be a viable partner based on its financial condition.
Financial Condition Analysis Report for ABC Healthcare Corporation
Introduction
It’s essential for senior management to know the financial condition of an organization in order to make strategic decisions. In this assessment, you will apply the financial management skills learned thus far.
- Tell the financial story based on financial statements.
- Conduct financial analysis and identify focus areas for enhancing shareholder value.
- Interpret ratio computations that are meaningful and inform business decisions and strategies.
- Make three recommendations that maximize shareholder value.
Scenario
Maria Gomez is the founder and president of ABC Healthcare Corporation, a company that owns hospitals, ambulatory surgical centers, urgent care centers, and outpatient clinics. She has called on you to review various financial documents and to make recommendations to maximize shareholder value.
Your Role
You are one of Maria’s high-performing financial analyst managers at ABC Healthcare Corporation, and she trusts your work and leadership.
Requirements
Here is what your report should provide for Maria:
- A summary of the financial strength of the company through your analysis of the price/earnings and price/book ratios.
See attached for information.
The price-to-book ratio (P/B ratio) compares a firm’s market capitalization to its book value. It’s calculated by dividing the company’s stock price per share by book value per share. Here, for fiscal year 2019, the book value per share ratio was 0.42. This explains that investors were willing to pay $0.42 for $1 of book value equity. Price to book value is an important measure to see how much equity shareholders are paying for the net assets value of the company. P/B ratios under 1 are typically considered solid investments.
- Based on your analysis, what is your general perception of the company’s financial strength? Is it performing well, given industry standards? How does it compare to its closest rival, HCA Healthcare? What information do you need in order to conduct such an analysis?
- Given your review, how can it maximize shareholder value? What are the focus areas for enhancing shareholder value in the long term? What short-term steps might be necessary for longer-term gains?
- In your analysis, you may choose to look at competitive data. You may calculate ratios to gain a true comparison.
- After conducting your analysis, provide at least three recommendations to Maria that maximize shareholder value.
Deliverable Format
Create a report that tells the financial condition of this company. Your report should provide information on the following:
- Analysis of the financial statements.
- Evaluation of the true condition and valuation of the company.
- Recommendation of actionable items for the company based on the financial analysis.
Financial Condition Analysis Report Requirements:
Remember that you’re preparing a professional document meant for executive leadership with limited time.
- Title Page.
- Executive Summary.
- Company Background.
- Overall Financial Analysis.
- Financial Ratio Analysis.
- Trend Analysis.
- Competitive Comparative Analysis.
- Recommendations.
- Conclusion.
- References.
- Appendix (if you have additional data, reports, charts, et cetera, to support your analysis).
Additional Requirements:
Your report should follow the corresponding MBA Academic and Professional Document Guidelines, including single-spaced paragraphs.
- Ensure written communication is free of errors that detract from the overall message and quality.
- Format your paper according to APA style and formatting.
- Use at least three scholarly resources.
- Length: Between 4-6 pages of content beyond the title page, references, and appendices.
- Use 12-point Times New Roman.
Evaluation
By successfully completing this assessment, you will demonstrate your proficiency in the following course competencies through corresponding scoring guide criteria:
- Competency 1: Apply the theories, models, and practices of finance to the financial management of an organization.
- Analyze financial ratio analysis, trend analysis, and competitive average analysis.
- Competency 3: Apply financial analyses to business planning and decision-making.
- Evaluate the provided financial statements of the firm to find its true condition and valuation.
- Competency 4: Use data to support evidence-based financial decisions.
- Develop actionable items and conclusions based on the analysis, recommending at least three ways to maximize shareholder value.
- Competency 5: Communicate financial information with multiple stakeholders
- Tell the current financial story as to the overall health of the firm as it relates to current valuation and the future prospects of the company. Identify focus areas for enhancing shareholder value for the long term. Note what short-term steps might be necessary for longer-term gains.
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