WGU C428 Financial Resource Management in Healthcare Key Ratios and Points

Total Profit Margin - Answer Net Income/Total Revenue. Measures the ability to control expenses (dollars of income per dollar of revenue) Higher the Total Margin, the lower the expenses relative to revenues Total Margin is lower than the industry average = indicating the expenses are higher than they should be or that revenues are too low for the expense structure of the business Low margins = problem w/expenses, revenues, or both Operating Margin - Answer Operating Income/Operating Revenue Measures the ability to control operating expenses (dollars of operating income per dollar of operating revenue) Focuses on core business operations, removes nonoperating income (unrelated to core operations) Profitability Rations - Answer Focuses on how much money a business earns on its revenues How much revenues are converted into earnings Indicates the ability of an organization to control its expenses Return Measures - Answer Focuses on how much a business earns on it assets or equity investment Return on Assets (ROA) - Answer Net Income/Total Assets