("Financial Profile," n.d.)
The long-term debt to equity ratio is when you are looking at the company's ability to finance growth through: increasing their total amounts of debt. When you see a reading of 100%, this is a sign of normal activity in most organizations. The higher that the number moves above 100%, the greater the chances are that they are financing their growth with debt offerings. In the case of St. Francis Care, their current long-term debt to equity ratio has increased from: 100.2% to 108.7% in one year. This is important, because it is showing how the facility has a lower amount of long-term debt equity. ("Financial Profile," n.d.)
However, when you look at the underlying trends of both ratios, it is clear the hospital has been increasing the total amount of debt. Evidence of this can be seen with the decline in: the current ratio and increase in the long-term debt to equity ratio. as, these new trends are indicating that the hospital is dealing with their various challenges through: increasing the amount liabilities. While this is not at critical levels,...
Therefore, management needs to be aware of these issues, otherwise they will have trouble paying the interest on these debt obligations (down the road). ("Financial Profile," n.d.)
Clearly, the best criterion for evaluating the strength of a health organization is: to use the current ratio and the long-term debt to equity ratio. This will tell you if a facility has the ability pay their financial obligation. In the case of St. Francis Care, they are in sound financial shape. However, the declining current ratio and increasing long-term debt to equity ratio, is a sign that the total liabilities have been rising. As a result, administrators need to use these tools to prevent these levels from becoming unmanageable.
Bibliography
Financial Profile. (n.d.). Data Advantage. Retrieved from: http://www.data-advantage.com/dasamples/bmk_financial.pdf
Top Issues. (2011). ACHE. Retrieved from: http://www.ache.org/pubs/research/ceoissues.cfm
