Financial ratios are a powerful tool for healthcare administrators to measure the financial performance of their organization. They can be used to identify trends and analyze performance over time. One key financial ratio that a health care administrator should create trend analysis for is the net profit margin (NPM). NPM measures how much after-tax profit an organization earns on each dollar of revenue and helps to evaluate an organization’s overall profitability (Gitman & Joehnk, 2015). An insight that may be gained by the administrator through this trend analysis is whether or not the price points established by services provided cover costs associated with delivering those services while also allowing for a reasonable level of profitability.
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