To assess the company’s efficiency, in this case, primary care practice, it is necessary to make a detailed assessment of the financial ratios. Such an analysis will allow understanding of whether it is worth accepting an offer of cooperation. In the presence of a sufficient amount of data, the most proper research will be focused on all groups of ratios. In this way, it will be possible to assess the company’s state at the moment more fully. I would choose return on assets as the first factor to evaluate. This factor demonstrates the profitability and efficiency of existing assets to generate revenue. Accordingly, the higher the ratio, the more profitable it is to conclude a contract with this company since a high proportion will mean more opportunities for personnel support and infrastructure upgrades1. However, it should be remembered that new ventures may have a below-average ratio due to the riskiness of investments in the health sector.
Among the group of parameters responsible for liquidity, I would choose the current ratio. The purpose of this group of financial parameters is to provide data on how effectively an organization can convert non-monetary assets into monetary ones1. The considered parameter also demonstrates the ratio of the organization’s assets to its liabilities. A high value of such a parameter can mean the efficiency of the company and the skill in using the available equipment and capabilities.
Among the long-term parameters, from my perspective, one of the most important is the Debt / Equity ratio. This group of parameters reflects the company’s ability to pay its debts while maintaining its obligations and profitability even in difficult situations2. From this point of view, this parameter is most valuable, as it demonstrates the company’s ability to pay off all its debts in the event of a sudden negative turn of events. Since business in the healthcare sector is extremely risky, this parameter must be evaluated especially carefully.
Finally, among the last group of asset management, I want to highlight the asset turnover ratio. This ratio demonstrates the cost of a company’s income to the value of its assets, thus showing how effectively the organization manages its available resources3. The parameter slightly overlaps with the liquidity parameter, but it is more focused on working with assets. A detailed assessment of the asset turnover allows a comprehensive evaluation of the company’s efficiency and potential growth prospects.
References
Paterson MA. Healthcare Finance and Financial Management. Lancaster, USA: DEStech Publications; 2014:143-151.
Fernando J. Debt-To-Equity Ratio (D/E). Investopedia. Web.
Hayes A. Asset Turnover Ratio. Investopedia. Web.