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KMID : 0387320080180020019
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Korean Journal of Health Policy and Administration
2008 Volume.18 No. 2 p.19 ~ p.38
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An Analysis of Structural Relationships among Financial Indicators of Hospitals in Kokrea: Applying Structural Equation Modeling(SEM)
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Jung Min-Soo
Choi Man-Kyu
Lee Keon-Hyung
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Abstract
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F inancial ratios are key indicators of an organization’s financial and business conditions. Among various financial indicators, profitability, financial structure, financial activity and liquidity ratios are frequently used and analyzed. Using the structural equation modeling(SEM) technique, this study examines the structural causal relationships among key financial indicators. D ata for this study are taken from complete financial statements from 142 hospitals that passed the standardization audit undertaken by the Korean Hospital Association from 1998 to 2001 for the purpose of accrediting teaching hospitals. In order to improve comparability, ratio values are standardized using the Blom’s normal distribution. T he final model of the SEM has four latent constructs: financial activity(total asset turnover, fixed asset turnover), liquidity(current ratio, quick ratio, collection period), financial structure(total debt to equity, long-term debt to equity, fixed assets to fund balance), and profitability(return on assets, normal profit to total assets, operating margin to gross revenue, normal profit to gross revenue). W hile examining several model fit indices(Chi-square (df) = 178.661 (40), likelihood ratio=4.467, RMR=.11, GFI=.849, RMSEA=.157), the final SEM we employed shows a relatively good fit. After examining the path oefficient of the constructs, the financial structure of the hospital affects the hospital’s profitability in a statistically significant way. A hospital which utilizes its liabilities, more specifically fixed liabilities, and makes a stable investment decision for fixed assets was found to have a higher profitability than other hospitals. Then, the standard path coefficients were examined to directly compare the influence of variables. It was found that there were no statistically significant path coefficients among constructs. When it comes to variables, however, statistically significant relationships were found between financial activity and fixed asset turnover, and between profitability and normal profit to gross revenue. These results show that the observed variables of fixed asset turnover and normal profit to gross revenue can be used as indicators representing financial activity and profitability.
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KEYWORD
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Financial ratio, Financial activity, Liquidity, Financial structure, Profitability
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