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MHA 612 AU Week 3 Operational Ratios and Profit Margins Discussion

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Accounting

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ashford university

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Week 3 MHA612
When dealing with operational ratios and profit margins according to (Cleverly 2011)
operating profit margin equals operating income / sales revenue therefore when looking at the
assignment it indicated that the operation profit margin ratio is for the company's financial
health. Most companies operate with high operational profit margins because they tend to do
better and are capable of paying for all of their fixed costs and interests. Why would companies
decide to do this? It's because they will be able to survive economically in the long run. Think
about it if that economy happens to go downhill they can be more competitive because they
chose to lower their prices against the competition. (Cleverly, 2011) also stated that an operating
margin is the remaining profit that is resulted after expenses are subtracted from the revenues. In
which means what is left after the company pays the cost of its production at the end of
everything what is left in revenue. This will result in allowing the company to know if they are in
good standing or not.
The medical service organization I chose to discuss is my employer UMC Hospital. In
which is the county Hospital and what they chose to do since the outbreak in order to manage
their operating margins was to close down some of the units due to low patient acuity. They have
closed down four med-surg floors in addition to providing early retirement to those employees
that have either 5 years or more at the hospital. Since the hospital is funded through the state and
is on a county budget they have to manage their margins even more closely. Their production
margins have to go for each unit; all the costs for medical equipment and services are all
budgeted in addition to salary per employee. That is why they have made the drastic cuts that
they have done. Instead of laying off employees they found other cost saving methods with their
operational margins.
Cleverley, W. O., Song, P. H., & Cleverley, J. O. (2011). Essentials of health care finance (7th
ed.). Sudbury, MA: Jones & Bartlett Learning. Retrieved from https://www.vitalsource.com

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Week 3 MHA612 When dealing with operational ratios and profit margins according to (Cleverly 2011) operating profit margin equals operating income / sales revenue therefore when looking at the assignment it indicated that the operation profit margin ratio is for the company's financial health. Most ...
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