A recent financial statement analysis from Sageworks, a financial information company for the private sector, revealed the fifteen industries with the highest return on equity (ROE) within the past twelve months. Return on equity is calculated by dividing annual net income by total equity (the difference between assets and liabilities), and the resulting figure is important because it allows businesses and investors to gauge how effectively the business is making a profit from their equity as well as whether the business will be able to grow in the future on its own (without any additional investments or debts).
Sageworks analyst Libby Biernan said to Forbes, “Sageworks looks at pre-tax rather than after-tax net profit when calculating ROE because we think it gives a more accurate reading of private companies’ operational performance. It’s how we avoid comparing apples to oranges in a database of companies from different states with different tax structures or with different tax-management practices.” In addition, the analysis also included owner compensation in excess of market-rate salaries in its “net income” figure, as this will help to provide a more accurate measure of each business’s operational performance.
Out of the top fifteen industries, home health care ranked sixth, with a 65.9% return on equity in the most recent twelve-month period, meaning that home health care agencies on average produce 65.9 cents of assets for every dollar invested in their business. Comparatively, the average return on equity for businesses in the Sagework database in the past twelve months is 38%. One reason for home health care – as well as other healthcare-based businesses – reporting such a high return on equity is the higher profit margins and barriers to entry. Most home health care agencies in the U.S. – though it varies depending on state law – require both a home health agency license and a home health agency certificate of need in order to operate, and many home health care employees are licensed nurses.
About Caitlin Morgan
These are just some loss prevention and risk management strategies that home health care agencies should have in place. Additionally, an end-to-end insurance solution that provides General Liability, Professional Liability, Workers’ Compensation, Employment Practices Liability, Crime, Cyber Liability, Non-Owned Auto, and other key coverages should be part of the organization’s program. Caitlin Morgan is a premier wholesaler providing insurance products for the home healthcare sector, which includes companies that provide healthcare services in patients’ private residences, assisted living or independent living facilities. For more information call us at (317) 575-4440.