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Title: Internal Financial Analysis of Universal Health Services
Introduction
Financial statements provide a snapshot of the internal financial performance and
position of an organization (Gapenski, 2011). Thus, to analyze and evaluate the financial
performance and position of an organization, analysis of the financial statement is made
(Gapenski & Reiter, 2015).
This paper aims at conducting an internal financial analysis of the Universal
Health Services (NYSE: UHS) based on the data and information contained in the
financial statements for the last three years. Universal Health Services, founded in 1978
by Alan B. Miller, is a hospital management companies in the United States (Universal
Health Services, 2017). It is a Fortune 500 company. At the end of 2016, the organization
has operation in 37 states of USA with more than 72600 employees (Universal Health
Services, 2017). Trend analysis and ratio analysis will be unemployed for the financial
statements analysis of the Universal Health Services.
Internal Financial Analysis of Universal Health Services (UHS)
Total current size of the healthcare market of the USA is $2.9 trillion. The overall
condition of the strong, and rapidly growing. The demand in the market is expected
increase in the future as implied from aging of the current baby boomer segment (Moritz,
2015). The UHS has successfully utilized the market opportunity. Overall sales revenue
of the company has been increased in the last three years (Appendix 02). The increase of
sales revenue is an indication of the increase of the market share of the company (Figure
3). Overall profitability of the company has been increased as improved from the increase
of net income (Figure 1), earnings per share (EPS) (Figure 1), and several profitability
ratios (Figure 2). The improvement of the overall profitability is mainly attributed by
better managing of the operation cost, and better utilization of resources. The
improvement of the market share and overall profitability has made the company an
attractive choice to the prospective and existing employee, investors, shareholders.
Revenue and Net Income of UHS
Axis Title
12000
10000
8000
6000
4000
2000
0
2014
2015
2016
Revenue
8065
9043
9766
Net income
545
681
702
Figure 1: Revenue and Net Income of UHS
Axis Title
EPS of UHS
8
7
6
5
4
3
2
1
0
Earnings per share
2014
2015
2016
5.52
6.89
7.22
Figure 2: EPS of UHS
Ratios
Profitability Ratios
Net Profit Margin
Return on Assets (ROA)
Return on Equity (ROE)
2014
2015
2016
6.76%
6.07%
14.59%
7.53%
7.07%
16.00%
7.19%
6.80%
15.49%
Figure 3: Profitability Ratios of UHS
Total Assets base of the UHS has been increased over the last three years. Over
the last three years, the company has experienced huge expansion. Cash investment in the
business and technology improvement over the last three years were huge (Appendix 02).
Overall cash management and cash position of the company has been improved as
implied from the increase of operating cash flows (Appendix 02). Ending cash balance
has been decreased due to injecting cash funds to the expansion project. Both- total
equity and total liabilities of the organization have been increased over the last three
years (Appendix 02). The assets of the organization is mainly backed by the funds of
both- equity and debt. Overall leverage of the organization even though increased, as
implied from the increase of leverage ratios, UHS has managed its debt effectively to
boost up its profit. The debt repayment capacity of the company has been improved over
the last three years as implied from the increase of times interest earned ratio over the last
three years (Figure 6).
Total Assets, Total Shareholder's Equity, Total Liabilities of UHS
Total assets
Total stockholders' equity
10318
9634
8974
5238
Total liabilities
3736
4250
2014
2015
5384
4533
5785
2016
Figure 4: Total Assets, Total Shareholder's Equity, Total Liabilities of UHS
Operatigng Cash Flow & Ending Cash Balance of UHS
Net cash provided by operating activities
Cash at end of period
1288
1036
34
1021
61
32
2014
2015
2016
Figure 5: Operating Cash Flow & Ending Cash Balance of UHS
Ratios
Leverage Ratios
Long-Term Debt
Ratio
Total Debt Ratio
Time Interest
Earned Ratio
(Times)
Formula
2014
2015
2016
Total Term Debt / Total
Assets
Total Debt / Total Assets
35.77%
58.37%
35.16%
55.89%
39.06%
56.07%
7.93
8.69
11.75
Operating Profit /
Interest Expense
Figure 6: Leverage Ratios of UHS
Overall financial performance and position of the UHS has been improved over
the last three years.
Recommended Strategy to Improve the Financial Performance
In a survey conducted by Fortune Magazine, 85% of the consumers they prefer
technology oriented services as a mean of quality service (Moritz, 2015). In the health
care sector, the role of digital technology is very crucial for improving operational
efficiency, and creating value & ensuing customer engagement. In the market, high
quality services is very important is very important customers. The qual...