Response to prompt 1
I agree with you that the conduction of a ratio analysis using the various items in the financial statement of a healthcare organization is very beneficial to the named institution's economic performance (Singh, 2016). Some of the benefits of the ratio analysis to the for-profit organizations range from the use in the indication of financial health to the proof of economic success to the existing and potential stakeholders in the organization (Singh, 2016). I also agree with you that the financial ratios enable the analysis to manage the cash flow and identifying the opportunities for profitability in a company. The creation of awareness to both the stakeholders and the employees of the organization is yet another merit of the ratio analysis in an organization (Singh, 2016). I would like to add on to the benefits of ratio analysis by stating that it enables the firm to come up with a forecast of its financial trajectory (Singh, 2016).
Response to prompt 2
I agree with you that the management of finances in any given organization may be an uphill task. Accounting standards have been developed by the Financial Accounting Standards Board (FASB) to standardize the process of accounting in the various organizations, which has been collectively known as the Generally Accepted Accounting Principles (GAAP) (Dudin et al., 2015). However, what could be the other reasons, apart from standardization of accounting that could have pushed FASB to develop the GAAP? It is right to say that the healthcare field such as in the United States of America has been rapidly changing just like in the other sectors of the country's economy. I agree with you that the standardization of accounting in organizations is a process with definite steps that every modern organization is expected to follow on its financial management journey (Dudin et al., 2015). Just like the changes in the Affordable Care Act (ACA), the American based insurers have to keep recalculating their plans to ensure they are up to date with the financial situations in the current world.
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References
Dudin, M., Prokofev, M., Fedorova, I., Frygin, A., & Kucuri, G. (2015). International Practice of Generation of the National Budget Income on the Basis of the Generally Accepted Financial Reporting Standards (IFRS) .
Singh, S. (2016, June 18). Top 6 advantages of ratio analysis . Retrieved from http://www.accountingnotes.net/cost-accounting/performance-evaluation/top-6-advantages-of-ratio-analysis/6246
