Textbook Problem 17.

1
a. What is the primary difference between financial statement analysis and operating indicator analysis?
Financial statement analysis is a way to define various factors indicators. Analyzing them year by year to underst
between various terms in balance sheet and profit and loss account. Operating indicator, on the other hand, defin
organizational goals defined by the top management.

b. Why are both types of analyses useful to health services managers and investors?
In a health service scenario both the analysis systems are useful to identify the key financial issues, efficiencies, ca
helps us understand and define whether the organization is moving towards its goal or not, and in the case of digr
ting indicator analysis?
ng them year by year to understand the financial relationship and dependence
ndicator, on the other hand, defines how well the organization is doing in terms of

s?
ey financial issues, efficiencies, capital structures, various profit magins etc. Also, it
oal or not, and in the case of digresson, a corrective action can be taken.
Textbook Problem 17.5
a. How does inflation distort ratio analysis comparisons, both for one company over time and when different compa
Inflation is the rate at which the price for goods and services increases over time. As inflation rises, the value of m
same amount of product. The rate of inflation varies depending on prevailing economic conditions. Adjusting for
because the cost of goods and services can change by the time a business finishes compiling the necessary data. F
data from the moment the accountant finishes the company's ratio analysis.

b. Are only balance sheet accounts or both balance sheet accounts and income statement items affected by inflation
Both Balance sheet accounts and Income statements are affected by inflation. Company financial statements are
business decisions. Financial statements contain a variety of fiscal data for a company, including total revenues, fi
statements can lead to incorrect or flawed data when using ratio analysis. Ensuring that all fiscal data contained o
mandatory before proceeding with ratio analysis. Failing to do can result in a unwise business decisions that can h
er time and when different companies are compared?
. As inflation rises, the value of money decreases because it takes more cash to buy the
onomic conditions. Adjusting for inflation is necessary when performing ratio analysis
s compiling the necessary data. Failing to make these adjustments results in inaccurate

tement items affected by inflation?

ompany financial statements are a critical component when using ratio analysis to make
pany, including total revenues, financial obligations and net profits. Flawed financial
ng that all fiscal data contained on company financial statements is correct is
wise business decisions that can harm total earnings.
 Particulars Amount in $ Amount as % of sales
Total Revenue 3,269,404.00 100.00%
Total Expenses 3,180,356.00 97.28%
Operating Income 89,048.00 2.72%
Tax@35% 31,167.00 -
Net Income 57,881.00 1.77%
Retained earnings 199,961.00 6.12%

At the begining of year

Retained earnings at the end of the year 257,842.00 7.89%
 Particulars Amount($) Amount in %
Total Assets: $2,502,992.00 100.00%
Current Assets $608,992.00 24.33%
Fixed Assets
- Property and Equipments $1,894,000.00 75.67%
Total Liabilities and $2,502,992.00 100.00%

Shareholder's equity
Current Liabilities $445,150.00 17.78%
Long Term Debt $1,700,000.00 67.92%
Total Shareholder's equity $357,842.00 14.30%