Question
f you have ever applied for a credit card or a loan, you have had your credit profile reviewed and you had to give information
f you have ever applied for a credit card or a loan, you have had your credit profile reviewed and you had to give information to the lender about your income and expenses. The lender used this information to perform a ratio to determine if you qualified for the loan. Essentially, the lender wants to know if you can afford the loan payments over a long period. This same principle is applied to business. The financial information can be obtained from a health care organization by reviewing their financial statements, as we discussed in Week 1. Financial statements can tell a lender if the organization is making enough money (revenue) to afford the debt associated with a loan. Review the financial ratios discussed in Ch. 2, A Further Look at Financial Statements, and Ch. 6, Reporting and Analyzing Inventory, of Accounting. Select 1 of the following financial ratios listed below to use for this discussion: Current ratio Debt to asset ratio Free cash flow ratio Price-earnings ratio Profit margin ratio Return on total assets ratio Working capital ratio Use your selected financial ratio and respond to the following in a minimum of 175 words: Explain how the financial ratio you selected is calculated. Explain why a financial institution or investor would use the financial ratio. Explain what the result of the financial ratio calculation would tell you about the organizations financial status. Give an example of how you would use 1 of the financial ratios in your personal finances or current profession.
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