Name
Institution

Financial Statement Analysis: Houston Methodist Company
Ratio Analysis
Ratio analysis refers to a quantitative analytical approach for analyzing the financial statement of a company (Rich, 2010). The analysis utilizes the line items in the financial statement such as the income statement, cash flow statements and balance sheet. During analysis, the ratio of one of these items or a combination of the items is calculated (Rich, 2010). The analysis performs an evaluation of different key aspects of the financial and operational performance of the firm. In this case, a ratio analysis is performed on the financial statements of Houston Methodist Company. Key financial and operating performances analyzed include the liquidity, efficiency, solvency and profitability ratios of the firm based on three major financial statements, that is, income statement, cash flow statement and balance sheet statement as summarized in the following discussion.
Table 1: Ratio Analysis

Table 1 above shows a summary of ratio analysis the three financial statements of the company. Starting with profitability ratios, the help assesses the ability of the business to generate income in reference to expenses and other related costs made over a particular period. Efficiency ratios measure the ability of the firm to manage its assets towards generating profits for the firm while liquidity ratios assess the ability of a firm to meet its current obligations based on its existing assets. Lastly, the capital structure ratio helps ascertain how the firm operations are financed from different sources of finance.
Break Even Analysis
Break-even analysis is a metric utilized in determining the period when the firm will start making positive returns or becoming capable of covering all of its expenditures (Cafferky & Wentworth, 2010). This includes assessing a number of startup costs that can help establish the revenues and cover the expenses of the business. Looking at Houston Methodist Company, it has managed to reach a break-even point across the two years, from 2012 to 2013 as revealed in its profits.
Horizontal and Vertical Analysis
Vertical analysis is an analysis that informs on the financial statement as a percentage of the other item (Rich, 2010). For instance, in the vertical analysis of Houston Methodist Company the balance sheet can be reported in terms of percentage of total assets, among other variables as summarized in the following table:

 Current Assets 2013 2012 Cash and cash equivalents 3.67% 2.83% Assets limited as to use 73.77% 75.56% Patient accounts receivable, net 18.96% 17.89% Inventory and other current assets 3.59% 3.73% Total current assets 100.00% 100.00% Assets limited as to use, net of amounts required to meet current obligations 33.36% 24.88% Property and equipment, net 36.50% 41.33% Other assets 0.60% 0.69% Total assets 100.00% 100.00%

Table 2: Vertical Analysis of Current Assets and Total Assets
On the other hand, the horizontal analysis examines the financial statements amounts over a period of years (Rich, 2010). For instance, the financial statements for Houston Methodist Company can be horizontally analyzed across 2012 and 2013 by looking at the percentage change observed across years.

 Assets Current Assets 2013 2012 Percentage Analysis Cash and cash equivalents \$71,457.00 \$55,147.00 22.82% Assets limited as to use \$1,434,466.00 \$1,474,265.00 -2.77% Patient accounts receivable, net \$ 368,757.00 \$349,075.00 5.34% Inventory and other current assets \$69,850.00 \$72,730.00 -4.12% Total current assets \$1,944,530.00 \$1,951,217.00 -0.34% Assets limited as to use, net of amounts required to meet current obligations \$2,195,842.00 \$1,466,690.00 33.21% Property and equipment, net \$2,402,478.00 \$2,435,958.00 -1.39% Other assets \$39,658.00 \$40,635.00 -2.46% Total assets \$6,582,508.00 \$5,894,500.00 10.45%

Table 3: Horizontal Analysis of Assets
As revealed under table 3 above, the horizontal analysis is done to help explain the effect of moving from 2012 to 2013 on the performance of the company assets. It is displayed as percentage ratios showing a positive or negative change.

References
Cafferky, M. & Wentworth, J. (2010). Breakeven analysis: the definitive guide to cost-volume-profit analysis. New York: Business Expert Press.
Rich, J. (2010). Cornerstones of financial accounting: current trends update. Australia Mason, Ohio: South-Western, Cengage Learning.

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