Financial Performance in Non-Profit Healthcare
Professor Office. (n.d.). Excel: Horizontal analysis and vertical analysis. Retrieved from http://professoroffice.com/VerticalHorizontalRatioAnalysis.aspx
Use the consolidated balance sheets downloaded from Ascension Health to perform a vertical analysis of the company and a horizontal analysis of the company in an Excel document.
Discuss your findings by answering the following:
Is Ascension Health growing? How do you know?
What line items reflected the largest-percentage increases and/or decreases?
What is the financial impact these changes have on the company’s financial viability currently and in the future?
To support your work, use your course and textbook readings and also use the South University Online Library. As in all assignments, cite your sources in your work and provide references for the citations in APA format.
Your assignment should be addressed in a 2- to 3-page document.
Submit your documents to the Submissions Area by the due date assigned.
Yes, Ascension Health is growing.
A horizontal analysis of the company’s balance sheet shows that the most important elements to take into consideration are total assets, total liabilities, and total shareholder’s equity. In the period between 2013 to 2014, Ascension Health’s total assets grew from $466000 in 2013 to $524000, an increase of $58000. In percentage form, this is an increase of 12.45%. In the same period, the company’s total liabilities increased from $143700 to $147000, a 2.38% increase. A vertical analysis of Ascension Health’s liabilities reveals that there was an increase from 28.1% in 2013 to 30.8% in 2014. Lastly, the company’s total shareholder’s equity rose from $466000 in 2013 to $524000 in 2014, an 11.07% increase. Using the balance sheet information that is provided, Ascension Health has gone through an ascendant trend in both assets and shareholder’s equity and a small increase in liabilities. Notably, the slight increase in total liabilities does not exceed the total assets. This is an indicator that the company is growing.
Some of the important information on the income statement that should be analyzed to establish the company’s financial health are net sales, net income, and gross profit. Using the provided income statement, it is evident that Ascension Health’s net sales rose from $192250 to $221160 in the period between 2013 and 2014, a 15.04% increase. The net income increased from $72845 to $87782 in the same period, a 20.51% increase. Finally, the company’s gross profit rose from $101250 in 2013 to $117385 in 2014, a 15.94% increase. Ascension Health’s income statement shows that the company is growing as it has experienced an ascendant trend in net sales, net income, and gross profit in the period between 2013 and 2014. Therefore, the findings from this financial statement analysis reveal that the company experienced growth during this period.
The line items that have the largest percentage increases on Ascension Health’s balance sheet are merchandise inventory (62.79%) and notes receivables (66.67%). Looking at Ascension Health’s income statement, the line items with the largest percentage increases are payroll tax expenses (31.53%), sales returns & allowances (39.64%), and delivery expenses (133.50%). On the other hand, the line items that reflected the largest percentage decreases on the company’s balance sheet are marketable securities (-9.09%), accounts receivable (-10.71%), and salaries payable (-75%). The line items that reflected the largest percentage decreases on the company’s income statement are merchandize inventory (-1.27%), telephone expenses (-16. 16%), and supplies expenses (-32%).
A rise in merchandise inventory and notes receivable assets will result in an increase in Ascension Health’s overall assets, and this increases the ability of the company to reimburse its obligations using current assets. A decrease in marketable securities, accounts receivables, and salaries payable will have a positive impact on Ascension Health’s total liabilities. This is because a decrease implies that the company will have substantially lower obligations to repay. A reduction in telephone expenses and supplies expenses means that there will be more operating income for financing Ascension Health’s business operations and projects in the future. Nonetheless, the rise in the company’s payroll tax expenses, delivery expenses, and sales returns, and allowances will have a negative financial impact on Ascension Health’s overall net income since these are expenses that lead to a lower net income.
- Professor Office. (n.d.). Excel: Horizontal analysis and vertical analysis. Retrieved from http://professoroffice.com/VerticalHorizontalRatioAnalysis.aspx
- Wild, J. (2019). Financial Accounting: Information for Decisions, 9e. McGraw Hill Education