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Health Management Associates (NYSE: HMA)

HMA is a company established in 1977 that runs acute care health care facilities in America. The HMA offers facilities like internal medicine, surgery, emergency room care, oncology, diagnostic care, radiology, and pediatric services. It also offers x-ray, lab, respiratory therapy, and physical therapy. The company has total 71 hospitals having above eleven thousand beds.

Conduct an internal financial analysis of Health Management Associates

With annual revenues increased to $5.87 billion, the company is showing growth in many areas. The internal financial analysis of the company gave following figures:

Year

2012

2011

2010

Liquidity Ratios

Current Ratio

Cash Ratio

21%

27%

36%

Quick Ratio

Profitability Ratios

Operating Margin

10%

11%

11%

Profit Margin

3%

4%

3%

Pre-Tax ROE

30%

41%

55%

After Tax ROE

16%

23%

29%

Data Interpretation

The company's ratio analysis shows that the current ratio has decreased over period (HMA Company Financials, 2013). The company has 151% or 1.51 current ratio. The decrease in current ration means the company has less cash to pay its debt hence the management needs to take steps about it. The current assets should be increased on one hand and current liabilities...

It tells creditors about credit history of company (Financial Analysis, 2009). The company has 21% or 0.21 cash ratio that means to pay $100 immediate loan, the company has $21 which is not satisfactory.
Quick ratio of company is decreasing as well that means it is losing its capacity to quickly convert assets into cash to pay the current liabilities. The ideal is 1:1 but the company has 135% that means 1.35 quick ratio that means it has too much cash on hands that may indicate issues with account receivables.

The company's profitability ratio operating martin value is 10% or 0.1. That indicates the pricing strategy and operating efficiency of company. The company's operating margin decreased from 11% that means operating margin is decreasing.

HMA's profit margin was 3% in 2010, 4% in 2011 and 3% once again in 2012. That shows what amount of every dollar earned converts into profit. Thus the company has profit margin fluctuating in a small range.

The return on equity of company is decreasing in since last three years. Thus the company requires investing more in equity to earn returns.

Financial Health of HMA

Every entity, person or organization has some financial health. The financial health shows if the entity has enough finances, it pays loan in time, and how does it manage the finances. The financial health of the company is not very ideal yet it can deal with challenges. The company has decreasing current, cash and quick ratios that inform the creditors that the company is gradually losing the ability to pay its short-term debt. Yet,…