Discussion

Theorganization uses three major types of operating indicators toanalyze finances. The first indicator is the labor cost. Labor costis a major indicator because the current salary cost is alreadyhigher than the national average (Jones and Bartlett Learning, 2012).This implies that the analysis that will lead to a decision onwhether the organization should renovate should consider theimplication that the decision will have on the cost of labor. Therenovation should be avoided if it will increase the cost of salariesto unreasonable levels.

Thesecond type of driver is the working capital (Jones and BartlettLearning, 2012). This refers to the amount of liquid assets, whichcan be determined by subtracting current liabilities from the currentassets. This is a category of capital resources that determine thecapacity of the organization to operate on a daily basis. Therefore,the process of financial analysis should consider the implication ofany changes in the organization on the working capital in order todetermine if the organization will be able to sustain the change andits daily operations.

Thethird type of drivers is the capital expenditure. Capital expenditureis the amount that the organization requires to enhance its long-termassets, including the buildings and equipment. It is a significantdriver for the organization because the firm already has a highervalue of capital expenditure ($ 213 million), which is higher thanthe national average (Jones and Bartlett Learning, 2012). It isimperative that the organization ensure that any changes in theorganization will inflate the capital expenditure further.

Returnon Equity ROE (determined by dividing the net income by the value ofequity) and return on assets (determined by diving net income withthe average assets) are the major financial ratios, which is (Jonesand Bartlett Learning, 2012). This ratio is critical because it isused as the primary measure that the organization uses to assess itsfinancial performance.

Reference

Jonesand Bartlett Learning (2012). Learnscape: Firm financial position ornot? HealthcareFinance Learnscape,3, 1-21.