Capella University ABC Healthcare Corporation Financial Condition Analysis Report

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Business Finance

Capella University

Description

Create a 4-6 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.

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 a 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 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.

The CFO for ABC Healthcare Corporation assessed the market value by reviewing its price/earnings ratios. The price/earnings ratio determines the market value of a stock as compared to the company's earnings. The price/earnings ratios are listed in the chart below. To calculate the price/earnings ratio, the CFO took the earnings per share and divided that into the market value. As an example, this means that in 2019 investors were willing to pay $12.10 for $1 of earnings.Price/Earnings Ratio201920182017Market Price83.6283.6283.62Earnings Per Share6.917.879.15Price/Earnings Ratio12.1010.639.14

To further assess market value, the CFO looked at book value per share. The book value per share ratio is the per share value of a company in terms of the equity available to stockholders. The book values per share over the past three years are listed in the chart below:

Price/Ratio Ratio201920182017Market Price83.6283.6283.62Book Value per Share199.1209.05226Price to Book Ratio.42.40.37

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 focus areas for enhancing shareholder value for 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).

Unformatted Attachment Preview

8/13/2021 Financial Condition Analysis Scoring Guide Financial Condition Analysis Scoring Guide CRITERIA NON-PERFORMANCE BASIC PROFICIENT DISTINGUISHED Analyze financial ratio analysis, trend analysis, and competitive average analysis. Does not analyze financial ratio analysis, trend analysis, and competitive average analysis. Analyzes financial ratio analysis, trend analysis, and competitive average analysis; however, there is a disconnect between the conclusions and the various financial analysis tools. Analyzes financial ratio analysis, trend analysis, and competitive average analysis. Analyzes financial ratio analysis from each category, trend analysis, and competitive average analyze; includes trend analysis going back three years for each ratio. Evaluate the provided financial statements of the firm to find its true condition and valuation. Does not analyze the provided financial statements of the firm. Analyzes the provided financial statements of the firm; however, does not accurately describe the firm's true condition and valuation. Evaluates the provided financial statements of the firm to find its true condition and valuation. Evaluates the provided financial statements of the firm to find its true condition and valuation; supports evaluation with details and examples to illustrate the strengths and weaknesses. Develop actionable items and conclusions, based on the analysis, recommending at least three ways to maximize shareholder value. Does not develop actionable items recommending at least three ways to maximize shareholder value. Develops items and conclusions; however, they are misaligned with the analysis. Develops actionable items and conclusions, based on the analysis, recommending at least three ways to maximize shareholder value. Develops actionable items and conclusions, based on the data analysis, recommending at least three ways to maximize shareholder value; actions and conclusions have strong alignment to the data analysis and interpretation. 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 shortterm steps might be necessary for longer-term gains. Does not outline a financial story as to the overall health of the firm as it relates to current valuation and the future prospects of the company. Does not identify focus areas for enhancing shareholder value for the long term nor note what short-term steps might be necessary for longerterm gains. Outlines a financial story of the firm as to the overall health of the firm as it relates to current valuation and the future prospects of the company. Does not identify focus areas for enhancing shareholder value for the long term nor note what short-term steps might be necessary for longerterm gains. Tells 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. Identifies focus areas for enhancing shareholder value for the long term. Notes what shortterm steps might be necessary for longer-term gains. Tells the current financial story of the firm as to the overall health of the firm as it relates to current valuation and the future prospects of the company; provides details and examples to support telling the financial story. Identifies focus areas for enhancing shareholder value for the long term. Notes what short-term steps might be necessary for longer-term gains. https://courserooma.capella.edu/bbcswebdav/institution/MBA-FPX/MBA-FPX5014/210700/Scoring_Guides/a01_scoring_guide.html 1/1 Price/Earnings Ratio 2019 2018 2017 Market Price 83.62 83.62 83.62 Earnings Per Share 6.91 7.87 9.15 Price/Earnings Ratio 12.10 10.63 9.14 To further assess market value, the CFO looked at book value per share. The book value per share ratio is the per share value of a company in terms of the equity available to stockholders. The book values per share over the past three years are listed in the chart below: Price/Ratio Ratio 2019 2018 2017 Market Price 83.62 83.62 83.62 Book Value per Share 199.1 209.05 226 Price to Book Ratio .42 .40 .37
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Explanation & Answer

View attached explanation and answer. Let me know if you have any questions.

Financial Condition Analysis: ABC Healthcare Corporation
Student’s Name
Institution
Course
Instructor’s Name
Date

Financial Condition Analysis: ABC Healthcare Corporation
Executive Summary
It is quite common for company management teams to consult with financial analysts to
determine the financial health of their companies. According to Maher et al. (2020), financial
condition analysis can be used to determine a company’s ability to meet current and future
obligations. It requires scrutiny of the company’s financial statements. ABC healthcare
corporation management team under the leadership of Maria Gomez is determined to find out the
company’s financial health through price-to-earnings and price-to-book ratio analyses. The
results are to be compared against those of its closest rival HAC healthcare. The data used is
obtained from the company’s financial statements in the years 2017, 2018, & 2019.
From the ratio analyses conducted, the P/E ratio shows an upward moving trend which is
an indication that the company is performing well. Investors anticipate that the company will
even perform better in the future and this explains the investors’ willingness to pay more for $1
of ABC’s earnings. The P/B ratio of ABC company is below 1 and somewhat steady for the three
years. This is relatively good as HAC registered a negative P/B ratio across the three years.
HAC’s assets may have been greatly undervalued especially in 2019 which is a sign of bad
financial health.
ABC can use different techniques to maximize shareholder value. Three of such
strategies that have been discussed in the paper are; strategic decision-making, the use of modern
technologies, and diversification. Strategic decision-making involves market research, and
knowledge management, and the formation of partnerships. Modern technologies include the use
of automated accounting systems and digital marketing. Diversification includes the formation of
an investment portfolio to minimize the risks of a total loss and exploring different sources of
capital instead of relying entirely on borrowings.

Company Background
Founded in 1983, ABC healthcare corporation continues to provide lasting healthcare
solutions. The company owns hospitals, urgent care centers, outpatient clinics, and ambulatory
surgical centers. To increase client satisfaction, the company employs highly qualified
professionals and clients have attested to the quality of services the company offers. Due to
changes in times and advancements in technology, the company has adopted various digital
means of operations. the company has an active website from which its information can be
found. The company also uses other platforms such as LinkedIn and Facebook to increase its
client reach.
The company was first established by Elwood Miller. ABC healthcare began as a
respiratory equipment and medical gas company but its functions in service delivery have
evolved. It specializes in home oxygen, rehabilitation technologies, home medical equipment,
COPD disease management, durable medical equipment, and home medical equipment. The
main goal of the company is to make its customers happy. This has been achieved through the
implementation of the necessary changes and the tailoring of services to meet customer needs. a
good example is such changes is the traini...


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