Universal Health Service Inc. Financial Plan Coursework Example

Universal Health Service Inc. Financial Plan
Student’s Name
Institution
Solution 1
Financial plan
The financial plan for an organization is very essential as it shows a comprehensive evaluation of current and future financial state which is used for annual projection of income and expense for a company. There is the different classification of the financial ratio used in financial evaluation which includes profitability, liquidity, asset efficiency, leverage ratios, etc. of which they are differently used based on the aspect of performance as proportion is intended to do (Muennig & Bounthavong, 2016). Profitability ratio focuses on firm ability to generate profit and return on assets and equities measures how management is efficient enough to earn profit from business resources. Liquidity ratio shows the firm’s ability to pay its short-term debt, and it majorly focuses on the firm’s current asset and current liability in the balance sheet. Asset efficiency ratio measures the efficiency in which the company uses its asset to produce sale, shows how frequently firms converts its asset into the sale. Leverage ratio measures the ability to affirm to survive for an extended period or meets its long-term debt obligation.
The financial analysts clearly considered current ratio as appropriate for financial analysis. A current ratio is sometimes a current company asset exceed its current liability, which is an indication of solvency of the business. The present ratio of UHS is 1.562 which is higher and therefore indicates a better liquidity and can now settle their short-term bill without any problem for the next three years.

The ratio has its limitation it does not simply disclose the liquidity of a firm this can be caused by the different ratio in different parts of the year, and also it’s difficult to compare with other companies hence mostly used in conjunction with other ratios (Muennig & Bounthavong, 2016).
However, the financial analysts considered the fact that the other ratios play a crucial role in understanding the diverse productivity perspectives in the organization. For instance, the Acid ratio or quick ratio indicates a company’s ability to satisfy current liability with its most liquid asset. The quick ratio for Universal Health Service is 1.239, this indicates that it can meet its short-term liability with short term asset it has in the next three years since the ratio is higher. The ratio has diverse challenges that may be very critical to handle by several scholars. It requires pertinent comparative analysis of the industry and peers in the society.
Net profit margin: This is the ratio of net revenue. This ratio indicates how much of dollar of revenue is left over after all cost and expense. A higher net of profit margin shows more efficiency of a company at converting its revenue into profit. Universal Health Service Inc. has a net profit margin of 7.5% which is a higher ratio, and this indicates that UHS has an efficient management of the affairs of business and also has effective cost control (Muennig & Bounthavong, 2016). This profit has some limitation in that it can’t alone determine a company total profit level without accounting for total sale volume
Debt to equity ratio: This ratio compares the use of debt and equity as a source of capital to finance the company assets. Universal Health Service Inc. has a debt to equity ratio of 78.6%; This indicates that UHS uses debt financing equal to 78.6% of the equity and availability of suitable assets could contribute this for offering security to lenders additionally high debt to equity ratio can increase risk on defaulting.
Return on equity: This is the critical amount of net income as the percentage of stockholders equity. The ratio shows the company’s state of investment. It shows the amount if incomes generated in the corporation by several key stakeholders (Finkler et al., 2016). It is computed as net income/shareholders’ equity. Universal Health Services has a return on equity 15% return on investment. Therefore, it is higher hence indicate that the company is generating profit. It has its limitation in that it does not take into consideration amount of debt of a company. Aside from the above ratio analysis, financial analyst mostly used Gross profit margin which has more advantages than other.
Gross profit margin: This is a profitability ratio that stipulates the relationship between total net sales revenue and gross profit. It is popularly used by the analyst to evaluate overall operation performance of the business. It is easy to compare with other company in the industry and can be easily read to show the improvement over past period. It can also be easily used to verify the value of inventory held by a firm hence more preferable than other ratios.
Solution 2
Universal Health Services Inc. can meet its financial obligation, and this can be attributed by their ratios such as:
Debt-equity ratio: The ratio is 78.6% which depicts UHS has the financial risk at an adequate level. Therefore, UHS can be able to meet its financial obligation. Healthy interest coverage contributes immensely on higher equity ratio thereby implying that loans can be obtained by taking less risk.
Cash ratio: This ratio measures the companies’ ability to meet its obligation with just cash at hand and cash. Universal Health Services has cash ratio of 0.05 which indicate it can meet its financial obligation.
Business does not plan to keep cash and cash equivalent at level with their current liabilities this is because they can use a portion of idle cash to generate profit. Therefore, UHS is below 1 and hence use their unused money to generate profit (Finkler et al., 2016). Therefore, they are capable of meeting their financial obligation.
Operating profit margin ratio: This is a ratio of operating income to revenue. This ratio indicates how much of each dollar of revenue is left over after all cost of goods sold and operating expenses are considered (Finkler et al., 2016). Universal Health Service Inc. has the operating profit margin of 86% which means 86% off sale revenue would be used to cover a cost of goods sold and operating expense of UHS. This means that Universal Health Services that comfortable meet its financial obligation.
Assets turnover: It measures the efficiency in which the company uses assets. It is calculated by dividing net sales by average total assets over specified period of time. Universal Health Service has the asset turnover ratio of 0.93. Which means every dollar invested in the asset of Universal Health Service it produces0.93 of sales (Muennig & Bounthavong, 2016). This support the organization in meeting its financial obligation.
Fixed asset to equity ratio: The ratio critically determines the shareholder’s sources of debts in the company’s capital. It is actively identified by dividing the critical fixed asset with shareholder’s equity. The fixed asset to equity ratio of UHS is 0.39. The shareholder’s equity finances are working capital and fixed assets of the firm. This is relevant in that it can be able to meet its financial obligation (Muennig & Bounthavong, 2016).
Solution 3
Profitability trend is the behavior of how the profit margin moves over the period. Profitability trend for UHS is favorable since there is a constant increase in net profit percentage. This can be significantly contributed to the increase in sale and also increase in the price of a solid unit all this leads to increase in profit (Finkler et al., 2016). Profitability trend is also favorable as seen in the constant increase in net income from 510,733 in 2013 to 680,528 in 2015.
Solution 4
Universal Health Inc. is viable for the next three years. This has been contributed by many factors such as; Profitability ratios: Net profit margin is positively improving each year which means the higher profit margin, the more a company is efficient, flexible and able take the new opportunity (Finkler et al., 2016). Therefore this makes Universal Health Service viable in the market in the next five years as it can compete with its competitors.
Liquidity ratio: It measures how much the company can pay your short-term debt, with a current ratio of 1.5 UHS can meet their short-term debt in the next five years hence viable in the market. Net revenue for the past three years has been increasing, from 7,367,873 in 2013 to 9,043,451 in 2015 which contribute to the increase in the profit hence Universal Health Services become more viable in the next five years increase in earnings per share: there is increase of earning per share from 5.14 in 2013 to 6.76 in 2015 growth in profit may have contributed this, and hence this attract more investors and therefore increase the viability of UHS in the next five years.
References
Finkler, S. A., Smith, D. L., Calabrese, T. D., & Purtell, R. M. (2016). Financial management for public, health, and not-for-profit organizations. CQ Press.
Muennig, P., & Bounthavong, M. (2016). Cost-effectiveness analysis in health: a practical approach. John Wiley & Sons.