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Saturday, August 29, 2009

Health Care Public Vs Private

RALEIGH, NC - JULY 29:   President Barack Obam...Image by Getty Images via Daylife

From the Hoss's Mouth

Why does health care cost so much? Forget all you hear about the high cost of developing new equipment and drugs, over-utilization, increased salaries for health care professionals, and an aging population. Money Magazine Hoss can give you the answer for the high cost of health care in one word: GREED.

Greed by health insurance companies who are in the business for the sole purpose of generating a profit. They could care less about providing affordable health care insurance for companies and individuals.

How does Money Magazine Hoss come to this conclusion? He does so by reading private for profit insurance horror stories posted all over the Internet and by reading private insurance whistle blower testimony given before Congress.

Health insurance companies are notorious for denying valid claims, using excuses such as claimant had a pre-existing condition, claimant provided false information on their application form (even if it was an honest mistake). Testimony before Congress indicated for-profit insurance companies employ the following strategies:

  • Regular meetings to identify high cost areas and how to redesign benefits to control them.
  • Multiple exclusion clauses which are unknown to doctor or patient until used by the insurance company to deny a claim.
  • Pre-existing condition exclusions which enable the plan to take steps to link a patient’s current diagnosis with some prior diagnosis and thus deny the claim
  • Misleading advertising which only highlights the benefits of the plan with no mention of the plans restrictions.
  • Denials on the grounds the treatment is not medically necessary--this is the insurance companies' ultimate cost control tool.
The above examples are by no means a complete list of all the methods used by insurance companies to reduce their costs.

For more info, see the testimony of LINDA PEENO, M.D.

Perhaps the most disturbing tactic Money Magazine Hoss has come across is when a terminally ill patient’s health care claim is denied. The health insurance company knows full well that the claimant will die before s/he can process an appeal, and thus they avoid paying for any treatment prior to death. Of course they always claim they had legitimate reasons for denying the claim.

Money Magazine Hoss resides in Canada, and we have a public health care system which, although not perfect, does take the profit incentive out of health care. The premiums are minimal and provisions are made for those with no or very little income. We do experience some delays but emergency cases are given priority.

Money Magazine Hoss supports President Obama’s public health care option, in fact he would like to see health care totally removed from for-profit companies.

Stay on Track,

Money Magazine Hoss

Next Hoss Cents Free Financial Money Magazine Post: September 06, 2009
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Sunday, August 23, 2009

Working Capital Per Dollar of Sales

From The Hoss's Mouth

Working Capital Per Dollar of Sales is another financial calculation investors use when analyzing the performance of a company. This calculation tells the potential investor the approximate working capital a company should have.

Simply put, working capital is Current Assets minus Current Liabilities. Working capital per dollar of sales is the Working Capital divided by Total Sales and is expressed as a percentage.

Working Capital Per Dollar of Sales = (Current assets - Current liabilities)/Total Sales.

Current assets and liabilities can be found on a company's Balance Sheet, and total sales is found on a company's Income Statement.

The trick for investors is recognizing the fact that working capital per dollar of sales varies across industry types.

For example, retailing businesses with substantial low cost sales require a working capital per dollar of sales of about 10 to 15 %, while industrial manufactures who produce high cost merchandise require 25 to 30%. Companies such as fast food chains, due to the cash nature of their business, often operate with a negative working capital per dollar of sales.

Smart investors, when analyzing prospective companies, are always cognizant of the fact that the character of the business plays a huge part in determining the amount of working capital per dollar of sales a business requires.

Money Magazine Hoss hopes you will find this information useful.

Stay on Track,

Money Magazine Hoss

Next Hoss Cents Free Financial Money Magazine Post: August 30, 2009
Return to previous post from Working Capital Per Dollar Of Sales
Related Posts:
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Calculating Asset Turnover
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Investment Strategy Dollar Cost Averaging
Market Timing
Calculating Net Profit Margin


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Sunday, August 16, 2009

Calculating Return on Assets (ROA)

From The Hoss's Mouth

Return on assets (ROA) is a tool investors use to determine how competent an organization is at using its assets to produce earnings. There are two primary formulas for calculating ROA.

Method One: Net Profit Margin x Asset Turnover

Method Two: Net Income / Average Assets for the Period

Both methods are acceptable but the investor must make sure that s/he uses the same method when performing these calculations, otherwise when comparing companies the results may be skewed. Just like when calculating the win percentage of two horses in a race, a handicapper would not use a formula which calculates win percentage by using total wins divided by total races for one horse and a formula that uses total wins at today's distance divided by total races at today's distance for another. This type of comparison would not produce meaningful results.

Generally speaking, the higher the ROA the better, however remember that widely different industries produce widely different ROA's. Industries such as railroads are asset heavy and will have lower ROA's than asset light companies. So always compare companies that are in the same industries; to use an old cliche: compare apples to apples.

There are many free online financial services which provide you with ROA numbers for all companies listed on the stock exchange, therefore Money Magazine Hoss is not going to bore you with sample calculations. Why perform all these mathematical calculations yourself when somebody is doing it for you and for free? For example, a quick look at Yahoo Financial shows that Amazon has a ROA of 6.93%.

Stay on Track,

Money Magazine Hoss

Next Hoss Cents Free Financial Money Magazine Post: August 23, 2009
Return to previous post from Calculating Return on Assets (ROA)

Related Posts:
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Calculating Net Profit Margin











Calculating Net Profit Margin
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Sunday, August 9, 2009

Calculating Asset Turnover Ratio

From The Hoss's Mouth

Asset turnover ratio is another financial tool investors use in their analysis of a company's efficiency. It calculates a business's effectiveness at using its assets in producing sales or revenue. The formula for this simple calculation is as follows:

Asset Turnover = Revenue/Assets (Assets in the example below are averaged for the period being calculated)

Let's take a look at Amazon for an example:

In 2005 Amazon had total assets of $3,696,000,000

In 2006 Amazon had total assets of $4,363,000,000

Average Assets = ($3,696,000,000 + $4,363,000,000) /2 = $4,029,500,000

Amazon's Total Revenue for 2006 was $19,166,000,000

Amazon's 2006 asset turnover ratio: $4,029,500,000 /$19,166,000,000 = .21

What this tells the investor is that for every dollar of assets Amazon had in 2006, they sold $.21 worth of product and services.

Money Magazine Hoss must point out that when comparing asset ratios it is important to compare companies that are in the same business industry. Generally, the company with the highest ratio is the most efficient.

Stay on Track,

Money Magazine Hoss

Next Hoss Cents Free Financial Money Magazine Post: Asset Turnover
Return to previous post from Calculating Asset Turnover Ratio



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Sunday, August 2, 2009

Calculating Return On Equity (ROE)

From The Hoss's Mouth


Financial analysts differ in their opinions of the value of using Return On Equity calculations to evaluate whether or not to buy shares in a company. Before Money Magazine Hoss gives you the pros on cons of this argument, lets examine the equation for calculating Return On Equity (ROE).

ROE= Net Income/Shareholder Equity

Financial analysts in favour of using ROE as an indication of when to buy stock suggest that you track ROE, and when you see a company with a double digit ROE and which is continually increasing it might be wise to consider buying the stock. You can use one of the many free or pay for service financial web sites available on the Internet for tracking ROE. Note: Not all continue to list ROE, but many do.

Other financial analysts consider ROE to be of little or no value to the potential investor. They point out that Net Income is not always a reliable corporate performance measurement. Why? Because companies use varying accounting procedures when calculating items such as capitalization, depreciation and growth rate, to name a few. Therefore, they conclude the formula for calculating ROE is not always reliable to determine a company’s success or corporate value.

The differing opinions are not unlike those of handicappers selecting a horse to bet on. Some use a horse’s total earnings divided by total races to determine the horse’s potential class. Many handicappers frown on this practice, as it does not take into account other factors such as but not limited to age, sex, distance, and surface.

In summary, the use of ROE by investors as a tool for investment purposes is a matter of personal choice.

Stay on Track,

Money Magazine Hoss

Next Hoss Cents Free Financial Money Magazine Post: Asset Turnover
Return to previous post from Calculating Return on Equity (ROE)



Related Posts:

Financial Statements Explained

The Balance Sheet

The Income Statement

Calculating Gross profit Margin Calculating Operating Margin

Investment Strategy Dollar Cost Averaging

Market Timing

Calculating Net Profit Margin







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