Assignment #3 6175

najanamisabal91

Assignment3-1.docx

Home >Business & Finance homework help >Management homework help >Assignment #3 6175

HSA 6175 FINANCIAL MANAGEMENT OF HEALTH SYSTEMS

ASSIGNMENT 3

DUE FEBRUARY 18, 2018

Listed below are the balance sheet and statement of operations for Wynn Memorial Nursing Home for 2008 and 2009.

Required:

1. Compute the following ratios for Wynn Memorial Nursing Home for 2008 and 2009

a. current ratio.

b. days in accounts receivable.

c. total asset turnover ratio.

d. fixed asset turnover ratio.

e. operating margin.

f. return on total assets.

g. long-term debt to net assets ratio.

Listed below are the industry standards of the above ratios for Wynn Memorial’s peer group.

2. Compare the year 2009 to the median:

a. calculate the variance

b. determine if the variance is favorable or unfavorable

3. Compare the two years:

a. calculate the variance

b. determine if the variance is favorable or unfavorable

See table below to facilitate the answers.

Rubrics:

Submissions of all problems: 50%

Problem 1 20%

Problem 2a 5%

Problem 2b 10%

Problem 3a 5%

Problem 3b 10%

Problem112a2b3a3b

Ratio

Industry

Median

WMNH

Actual

2008

WMNH

Actual

2009

Variance

2009 to

Median

2009

Compared

to Median

(F/U)*

Variance

2008 over

2009

Compared to

2008 (F/U)*

Current ratio

Days in accts receivable

Total asset turnover

Fixed asset turnover

Operating margin

Return on total assets

Long-term debt to net assets

Wynn Memorial Nursing Home

Financial Ratio Analysis

For the Year 2008 and 2009

* F= Favorable, U= Unfavorable

Balance Sheet for Wynn Memorial Nursing Home

20092008

Current Assets:

Cash and Cash Equivalents$30$50

Net Patient Receivables295235

Prepaid Expenses8080

Total Current Assets405365

Plant, Property, & Equipment

Gross Plant, Property, & Equipment350300

(less Accumulated Depreciation)(70)(50)

Net Plant, Property, & Equipment280250

Construction in Progress2030

Total Assets$888$615

Current Liabilities:

Accounts Payable$220$190

Salaries Payable7550

Total Current Liabilities295240

Long-Term Liabilities:

Bonds Payable10020

Total Long-Term Liabilities10020

Net Assets493355

Wynn Memorial Nursing Home

Balance Sheet (in 000)

For the Years Ending December 31, 2009 and 2008

Ex 4-1

Exhibit 4– 1 Statement of Operations and Balance Sheet for Newport Hospital

	Newport Hospital				Newport Hospital
	Statement of Operations				Balance Sheet
	For Years Ended December 31, 20X1 and 20X0				For Years Ended December 31, 20X1 and 20X0
		12/31/20X1	12/31/20X0			12/31/20X1	12/31/20X0
	Operating Revenues				ASSETS			% of Total	% Change
	Net Patient Revenues	$10,778,272	$10,566,176	Percent *	Current Assets			Assets	20x0-20x1
	Other Operating Revenues	233,749	253,517		Cash & Marketable Securities	$363,181	$158,458
	Total Operating Revenues	11,012,021	10,819,693	97.7%	Patient Accounts Receivables
				2.3%	Net of Uncollectible Accounts	1,541,244	1,400,013	1.4%	129.2%
	Operating Expenses:				Inventories	346,176	316,875
	Salaries and Benefits	5,644,880	5,345,498	100.0%	Prepaid Expenses	163,734	78,788	12.4%	10.1%
	Supplies	1,660,000	1,529,680		Other Current Assets	100,000	0	2.8%	9.2%
	Insurance	1,536,357	1,551,579		Total Current Assets	2,514,335	1,954,134	0.7%	107.8%
	Depreciation	383,493	420,238					0.0%	N/A
	Interest	500,000	276,379		Non-Current Assets			17.3%	28.7%
	Bad debt	456,289	365,678	49.4%	Gross Plant, Property, & Equipment	7,088,495	6,893,370
	Other	500,093	276,455	14.1%	(less Accumulated Depreciation)	(2,781,741)	(2,398,248)
	Total Operating Expenses	10,681,112	9,765,507		Net Plant, Property, and Equipment	4,306,754	4,495,122	60.9%	2.8%
				3.9%				-21.2%	16.0%
	Operating Income	330,909	1,054,186	2.6%	Long-Term Investments	3,414,732	4,525,476	39.7%	-4.2%
	Non-Operating Revenue	185,000	165,000	3.4%	Other Assets	640,915	340,853
	Excess of Revenues Over Expenses	515,909	1,219,186	0.0%	Total Non-Current Assets	8,362,401	9,361,451	40.0%	-24.5%
				2.6%				N/A	N/A
	Increase (Decrease) in			90.3%	Total Assets	$10,876,736	$11,315,585
	Unrestricted Net Assets	$515,909	$1,219,186					3.0%	88.0%
					LIABILITIES AND NET ASSETS
				9.7%	Current Liabilities
					Accounts Payable	$387,646	$166,600			0
				11.3%	Salaries Payable	135,512	529,298	100.0%	-3.9%
					Notes Payable	500,000	2,359,524
					Current Portion of Long-Term Debt	372,032	338,996
					Total Current Liabilities	1,395,190	3,394,418
								1.5%	132.7%
					Long-Term Liabilities			4.7%	-74.4%
					Bonds Payable	6,938,891	6,009,484	20.9%	-78.8%
					Total Long-Term Liabilities	6,938,891	6,009,484	3.0%	9.7%
								30.0%	-58.9%
					Total Liabilities	8,334,081	9,403,902

					Net Assets			53.1%	15.5%
					Unrestricted	1,901,739	1,570,830
					Temporary Restricted	328,000	40,853	53.1%	15.5%
					Permanently Restricted	312,916	300,000
					Total Net Assets	2,542,655	1,911,683	83.1%	-11.4%

					Total Liabilities and Net Assets	$10,876,736	$11,315,585
								13.9%	21.1%

Ex 4-2

Exhibit 4-2 Horizontal Analysis of the Statement of Operations
and Balance Sheet for Newport Hospital

	Newport Hospital
	Statement of Operations
	For the Years Ended December 31, 20X1 and 20X0
				% Change
		12/31/20X1	12/31/20X0	20X1-20X0
	Operating Revenues:
	Net Patient Revenues	$10,778,272	$10,566,176	2.0%
	Other Operating Revenues	233,749	253,517	-7.8%
	Total Operating Revenues	11,012,021	10,819,693	1.8%

	Operating Expenses:
	Total Operating Expenses	10,681,112	9,765,507	9.4%

	Operating Income	330,909	1,054,186	-68.6%
	Non-Operating Revenue	185,000	165,000	12.1%
	Excess of Revenues Over Expenses	515,909	1,219,186	-57.7%

	Increase (Decrease) in	$515,909	$1,219,186	-57.7%
	Unrestricted Net Assets


	Newport Hospital
	Balance Sheet
	December 31, 20X1 and 20X0
				% Change
		20X1	20X0	20X1-20X0
	ASSETS
	Total Current Assets	$2,514,335	$1,954,134	28.7%
	Total Non-Current Assets	8,362,401	9,361,451	-10.7%
	Total Assets	$10,876,736	$11,315,585	-3.9%

	LIABILITIES AND NET ASSETS
	Total Current Liabilities	$1,395,190	$3,394,418	-58.9%
	Total Long-Term Liabilities	6,938,891	6,009,484	15.5%
	Total Net Assets	2,542,655	1,911,683	33.0%
	Total Liabilities and Net Assets	$10,876,736	$11,315,585	-3.9%

Ex 4-3

Exhibit 4-3 Vertical (Common-Size) Analysis for the Statement of Operations and Balance Sheet for Newport Hospital

	Newport Hospital
	Statement of Operations
	For Years Ended December 31, 20X1 and 20X0
			% of Total		% of Total
		12/3120X1	Revenues	12/3120X0	Revenues
	Operating Revenues
	Net Patient Revenues	$10,778,272	97.9%	$10,566,176	97.7%
	Other Operating Revenues	233,749	2.1%	253,517	2.3%
	Total Operating Revenues	11,012,021	100.0%	10,819,693	100.0%

	Operating Expenses:
	Total Operating Expenses	10,681,112	97.0%	9,765,507	90.3%

	Operating Income	330,909	3.0%	1,054,186	9.7%
	Non-operating revenue	185,000	1.7%	165,000	1.5%
	Excess of Revenues over Expenses	515,909	4.7%	1,219,186	11.3%

	Increase (Decrease) in Unrestricted Net Assets	$515,909	4.7%	$1,219,186	11.3%


	Newport Hospital
	Balance Sheet
	For Years Ended December 31, 20X1 and 20X0
			% of Total		% of Total
		20X1	Assets	20X0	Assets
	Assets
	Total Current Assets	$2,514,335	23.1%	$1,954,134	17.3%
	Total Non-Current Assets	8,362,401	76.9%	9,361,451	82.7%
	Total Assets	$10,876,736	100.0%	$11,315,585	100.0%

	Liabilities and Net Assets
	Total Current Liabilities	$1,395,190	12.8%	$3,394,418	30.0%
	Total Long-Term Liabilities	6,938,891	63.8%	6,009,484	53.1%
	Total Net Assets	2,542,655	23.4%	1,911,683	16.9%

	Total Liabilities and Net Assets	$10,876,736	100.0%	$11,315,585	100.0%

Ex 4-4

Exhibit 4-4 Common-Size Financial Statements for a Small and a Large Hospital

	Small Community Hospital Balance Sheet			Small Community Hospital Statement of Operations
	December 31, 20X0			December 31, 20X0
			% Total			% Total
			Assets			Revenues
	Current Assets	$1,000	10%	Net Patient Revenues	$10,000	83%
	Net Plant and Equipment	9,000	88%	Investment Income	2,000	17%
	Other Assets	200	2%	Total Revenues	12,000	100%
	Total Assets	$10,200	100%
				Operating Expenses	10,000	83%
	Current Liabilities	$900	9%	Income from Operations	2,000	17%
	Long-Term Debt	5,000	49%
	Total Liabilities	5,900	58%	Excess of Revenues Over Expenses	2,000	17%

	Net Assets	4,300	42%	Increase in Net Assets	$2,000	17%
	Total Liabilities and Net Assets	$10,200	100%

	Large Community Hospital Balance Sheet			Large Community Hospital Statement of Operations
	December 31, 20X0			December 31, 20X0
			% Total			% Total
			Assets			Revenues
	Current Assets	$15,000	22%	Net Patient Revenues	$68,000	97%
	Net Plant and Equipment	50,000	75%	Investment Income	2,000	3%
	Other Assets	2,000	3%	Total Revenues	70,000	100%
	Total Assets	$67,000	100%
				Operating Expenses	65,000	93%
	Current Liabilities	$12,000	18%	Income from Operations	5,000	7%
	Long-Term Debt	35,000	52%
	Total Liabilities	47,000	70%	Excess of Revenues Over Expenses	5,000	7%

	Net Assets	20,000	30%	Increase in Net Assets	$5,000	7%
	Total Liabilities and Net Assets	$67,000	100%

	Note: All figures expressed in '000.

Ex 4-5a

Exhibit 4-5a Newport Hospital Ratios for 20X0 and 20X1, and HCIA & HCFA Median Ratio Values

		Standard
		Small Hospitals'				Current
		HCIA & HCFA	Desired	Trend Analysis		Year	Trend	Possible Explanation
	Ratios	Median Ratio[1]	Position	20X1	20X0	Position	Position	Current Year Relative to Standards
	Liquidity Ratios
	Current Ratio	2.18	Above	1.80	0.58	Below	Increasing	Lower cash & mkt securities & higher receivables
	Quick Ratio[2]	1.76	Above	1.36	0.46	Below	Increasing	Lower cash & mkt securities & higher receivables
	Acid Test Ratio	0.35	Above	0.26	0.05	Below	Increasing	Lower cash & mkt securities
	Days in Accounts Receivable	67	Below	52	48	Below	Increasing	Slower collection of receivables
	Days Cash on Hand[2]	46	Above	13	6	Below	Increasing	Less cash & mkt securities
	Average Payment Period	54	Below	49	133	Below	Decreasing	Faster payment of payables

	Profitability Ratios
	Operating Margin	0.02	Above	0.03	0.10	Above	Decreasing	Expenses growing at higher rate than revenues
	Non-Operating Revenue[2]	0.05	Varies	0.02	0.02	Below	Increasing	No change in non-operating income
	Return on Total Assets	0.03	Above	0.05	0.11	Above	Decreasing	Declining profits from higher expenses
	Return on Equity Net Assets[2]	0.06	Above	0.20	0.64	Above	Decreasing	Declining profits from higher expenses

	Activity Ratios
	Total Asset Turnover Ratio	1.02	Above	1.01	0.96	Below	Increasing	Total Assets generating less revenues
	Net Fixed Assets Turnover Ratio	3.59	Above	2.56	2.41	Below	Increasing	Fixed Assets generating less revenues
	Age of Plant Ratio	9.86	Below	7.25	5.71	Below	Increasing	Newer plant and equipment

	Capital Structure Ratios
	Long-Term Debt to Net Assets Ratio	0.21	Below	2.73	3.14	Above	Decreasing	Higher long-term debt relative to equity
	Net Assets to Total Assets Ratio[2]	0.62	Above	0.23	0.17	Below	Increasing	Lower equity relative to total assets
	Times Interest Earned Ratio[2]	2.85	Above	2.03	5.41	Below	Decreasing	Lower profits from higher expenses
	Debt Service Coverage Ratio	3.35	Above	2.00	4.02	Below	Decreasing	Lower profits from higher expenses

	[1] Since Newport Hospital was less than 100 beds, HCIA -Sachs' Standard ratio values for Beds less than 100 were used.
	[2] These Standard ratios values were obtained from Health Care Financing Administration
	Hospital Cost Report Information System Files for financial statements ending in 1998.

	Based upon HCIA-Sachs 1998 Median values, which approximate hospital medians in mid-1990s.

Ex 4-6

Exhibit 4-6 Selected Liquidity Ratios
					Desired
	Ratio	Formula		Standard1	Position

	Current Ratio		Current Assets	2.18	Above
			Current Liabilities

	Quick Ratio	Cash + Marketable Securities + Net Receivables		1.76	Above
		Current Liabilities

	Acid Test Ratio		Cash + Marketable Securities	0.35	Above
			Current Liabilities

	Days in Accounts Receivable		Net Patient Accounts Receivable	67	Below
			Net Patient Revenues / 365

	Days Cash on Hand	Cash + Marketable Securities		46	Above
		(Operating Expenses – Depreciation Expense) / 365

	Average Payment Period (Days)	Current Liabilities			Organizationally
		(Operating Expenses – Depreciation Expense) / 365		54	Dependent

	1 Based upon HCIA-Sachs’ 1998 approximate hospital median values in mid-1990s

Standard1

Ex 4-6a

Exhibit 4-6a Newport's Current Ratio for 20X0 and 20X1

	Year	Current Ratio	=	Current Assets	/	Current Liabilities

	20X1	1.80	=	$2,514,335	/	$1,395,190
	20X0	0.58	=	$1,954,134	/	$3,394,418

	Standard = 2.18

Ex 4-6b

Exhibit 4- 6b Newport's Quick Ratio for 20X0 and 20X1

				(Cash +		Net Accounts		Current
	Year	Quick Ratio	=	Marketable Securities	+	Receivable)	/	Liabilities

	20X1	1.36	=	$363,181	+	$1,541,244	/	$1,395,190
	20X0	0.46	=	$158,458	+	$1,400,013	/	$3,394,418

	Standard = 1.76

Ex 4-6c

Exhibit 4– 6c Newport’s Acid Test Ratio for 20X0 and 20X1

		Acid Test		(Cash +		Current
	Year	Ratio	=	Marketable Securities	/	Liabilities

	20X1	0.26	=	$363,181	/	$1,395,190
	20X0	0.05	=	$158,458	/	$3,394,418

	Standard = 0.35

Ex 4-6d

Exhibit 4-6d Newport's Days in Accounts Receivable Ratio of 20X0 and 20X1

	Steps 1,2
		Avg. Net Patient			Net Patient
	Year	Revenues Per/Day		=	Revenues	/	365 days

	20X1	$29,530	/day	=	$10,778,272	/	365	days
	20X0	$28,948	/day	=	$10,566,176	/	365	days


	Steps 3,4
		Days in			Net Patient		Avg. Net Patient
	Year	Accounts Receivable		=	Accounts Receivable	/	Revenues Per/Day

	20X1	52	days	=	$1,541,244	/	$29,530	/day
	20X0	48	days	=	$1,400,013	/	$28,948	/day

	Standard = 67 days

Ex 4-6e

Exhibit 4-6e Newport’s Days Cash on Hand Ratio for 20X0 and 20X1

		Operating					Depreciation
	Year	Expense per Day		=	(Operating Expenses	-	Expense)	/	365 days

	20X1	$28,213	/day	=	$10,681,112	-	$383,493	/	365	days
	20X0	$25,603	/day	=	$9,765,507	-	$420,238	/	365	days


		Days Cash			Cash +		Operating
	Year	On Hand		=	Marketable Securities	/	Expense per Day

	20X1	13	days	=	$363,181	/	$28,213	/day
	20X0	6	days	=	$158,458	/	$25,603	/day

	Standard = 46 days

Ex 4-6f

Exhibit 4-6f Newport’s Average Payment Period Ratio for 20X0 and 20X1

	Steps 1, 2
		Average Cash			(Total		Depreciation
	Year	Expense per Day		=	Expenses	-	Expense)	/	365 days

	20X1	$28,213	/day	=	$10,681,112	-	$383,493	/	365	days
	20X0	$25,603	/day	=	$9,765,507	-	$420,238	/	365	days


	Steps 3, 4
		Avg. Payment			Current		Average Cash
	Year	Period		=	Liabilities	/	Expense per Day

	20X1	49	days	=	$1,395,190	/	$28,213	/day
	20X0	133	days	=	$3,394,418	/	$25,603	/day

	Standard = 54 days

Ex 4-7Data

Exhibit 4-7 Newport Hospital’s Current, Quick, and Acid Test Ratios in 20X0 and 20X1 as Compared to the Standard

		20X0	20X1	Standard
	Current Ratio	0.58	1.80	2.18
	Quick Ratio	0.46	1.36	1.76
	Acid Test Ratio	0.05	0.26	0.35

Desired position is below the standard for the days in accounts receivable ratio and above the standard for the days cash on hand ratio. The desired position relative to the standard for the average payment period ratio is organizationally dependent.

Page &P

Ex 4-7Data

1	2	2
0	1	2
0	0	0

Page &P

19X0

19X1

Standard

Ex 4-7Ch

1	2	2
0	1	2
0	0	0

20X0

20X1

Standard

Ex 4-7

Exhibit 4-7 Newport Hospital’s Current, Quick, and Acid Test Ratios in 20X0 and 20X1 as Compared to the Standard

Ex 4-7

1	2	2
0	1	2
0	0	0

20X0

20X1

Standard

Ex 4-8Data

Exhibit 4– 8 Newport Hospital’s Days in Accounts Receivable, Days Cash on Hand, and
Average Payment Period Ratios for 20X0 and 20X1 as Compared to the Standard

		20X0	20X1	Standard
	Days in A/R	48	52	67
	Days Cash on Hand	6	13	46
	Avg. Payment Period	133	49	54

Ex 4-8Data

1	2	2
0	1	2
0	0	0

Page &P

19X0

19X1

Standard

Ex 4-8Ch

48	52	67
6	13	46
133	49	54

Page &P

Days in A/R

Avg. Payment Period

19X0

19X1

Standard

#REF! #REF!

133

20X0

20X1

Standard

Ex 4-8

Exhibit 4– 8 Newport Hospital’s Days in Accounts Receivable, Days Cash on Hand, and

Average Payment Period Ratios for 20X0 and 20X1 as Compared to the Standard

Ex 4-8

48	52	67
6	13	46
133	49	54

20X0

20X1

Standard

Ex 4-9

Exhibit 4-9 Selected Profitability Ratios
					Desired
	Ratio	Formula		Standard1	Position

	Operating Margin		Operating Income	0.02	Above
			Total Operating Revenues

	Nonoperating Revenue Ratio		Nonoperating Revenues	0.05	Organizationally
			Total Operating Revenues		Dependent

	Return on Total Assets2	Excess of Revenues over Expenses		0.03	Above
			Total Assets

	Return on Net Assets3	Excess of Revenues over Expenses		0.06	Above
			Net Assets

	1 Based upon HCIA-Sachs’ 1998 approximate hospital median values in mid-1990s
	2 Called return on assets and calculated as net income/total assets in for-profit health care organizations
	3 Called return on equity in for-profit health care organizations (net income/owners’ equity)

Ex 4-9a

Exhibit 4-9a Newport’s Operating Margin Ratio for 20X0 and 20X1

		Operating		Operating		Total Operating
	Year	Margin	=	Income	/	Revenues

	20X1	0.03	=	$330,909	/	$11,012,021
	20X0	0.10	=	$1,054,186	/	$10,819,693

	Standard = 0.02

Ex 4-9b

Exhibit 4-9b Newport’s Non-Operating Revenue Ratio for 20X0 and 20X1

		Non-Operating		Non-Operating		Total Operating
	Year	Revenue Ratio	=	Revenues	/	Revenues

	20X1	0.02	=	$185,000	/	$11,012,021
	20X0	0.02	=	$165,000	/	$10,819,693

	Standard = 0.05

Ex 4-9c

Exhibit 4-9c Newport’s Return on Total Assets Ratio for 20X0 and 20X1

		Return on		Excess of Revenues
	Year	Total Assets	=	over Expenses	/	Total Assets

	20X1	0.05	=	$515,909	/	$10,876,736
	20X0	0.11	=	$1,219,186	/	$11,315,585

	Standard = 0.03

Ex 4-9d

Exhibit 4-9d Newport’s Return on Net Assets Ratio for 20X0 and 20X1

		Return on		Excess of Revenues
	Year	Net Assets	=	over Expenses	/	Net Assets

	20X1	0.20	=	$515,909	/	$2,542,655
	20X0	0.64	=	$1,219,186	/	$1,911,683

	Standard = 0.06

Ex 4-10

Exhibit 4-10

	In Case 1, the organization has no debt. In Case 2, the organization has 50 percent of its assets financed by debt.
	In both cases, the organization makes a $100,000 profit, but the return on net assets is twice as high in Case 2.

	Case 1: $100,000 Excess of Revenues over Expenses; no debt

	Balance Sheet				Statement of Operations
	Assets	$1,000,000	Debt	$0	Excess of Revenues over Expenses	$100,000
			Net Assets	$1,000,000

	Return on Net Assets = $100,000 / $1,000,000 = 0.10

	Case 2: $100,000 Excess of Revenues over Expenses; 50% debt

	Balance Sheet				Statement of Operations
	Assets	$1,000,000	Debt	$500,000	Excess of Revenues over Expenses	$100,000
			Net Assets	$500,000

	Return on Net Assets = $100,000 / $500,000 = 0.20

	In Case 3, the organization has no debt. In Case 4, the organization has 50 percent of its assets financed by debt.
	In both cases, the organization incurs a $100,000 loss, but the negative return on net assets is twice as much in Case 4.

	Case 3: ($100,000) Excess of Revenues over Expenses; no debt

	Balance Sheet				Statement of Operations
	Assets	$1,000,000	Debt	$0	Excess of Revenues over Expenses	($100,000)
			Net Assets	$1,000,000

	Return on Net Assets = -$100,000 / $1,000,000 = -0.10

	Case 4: ($100,000) Excess of Revenues over Expenses; 50% debt

	Balance Sheet				Statement of Operations
	Assets	$1,000,000	Debt	$500,000	Excess of Revenues over Expenses	($100,000)
			Net Assets	$500,000

	Return on Net Assets = -$100,000 / $500,000 = -0.20

	Point: Increased debt magnifies both gains and losses when computing Return on Net Assets.

Ex 4-11Data

Exhibit 4-11 Newport Hospital’s Profitability Ratios for 20X0 and 20X1 as Compared to the Standard

		20X0	20X1	Standard
	Operating Margin	0.10	0.03	0.02
	Non-Operating Revenue	0.02	0.02	0.05
	Return on Total Assets	0.11	0.05	0.03
	Return on Net Assets	0.64	0.20	0.06

Page &P

Ex 4-11Ch

0	0	0
0	0	0
0	0	0
1	0	0

20X0

20X1

Standard

Ex 4-11

Exhibit 4-11 Newport Hospital’s Profitability Ratios for 20X0 and 20X1 as Compared to the Standard

Ex 4-11

0	0	0
0	0	0
0	0	0
1	0	0

20X0

20X1

Standard

Ex 4-12

Exhibit 4-12 Selected Activity Ratios

	Ratio	Formula		Standard1	Desired Position

	Total Asset Turnover Ratio		Total Revenues2	1.02	Above
			Total Assets

	Fixed Asset Turnover Ratio	Total Revenues2		3.59	Above
		Net Plant and Equipment

	Age of Plant Ratio	Accumulated Depreciation		9.86	Below
		Depreciation Expense

	1 Based upon HCIA-Sachs’ 1998 median values
	2 Operating Revenues are often used in place of Total Revenues

Ex 4-12a

Exhibit 4-12a Newport’s Total Asset Turnover Ratio for 20X0 and 20X1

		Total Asset		Total		Total
	Year	Turnover	=	Revenues	/	Assets

	20X1	1.01	=	$11,012,021	/	$10,876,736
	20X0	0.96	=	$10,819,693	/	$11,315,585

	Standard = 1.02

Ex 4-12b

Exhibit 4-12b Newport’s Fixed Asset Turnover Ratio for 20X0 and 20X1

		Fixed Asset		Total		Net Plant and
	Year	Turnover	=	Revenues	/	Equipment

	20X1	2.56	=	$11,012,021	/	$4,306,754
	20X0	2.41	=	$10,819,693	/	$4,495,122

	Standard = 3.59

Ex 4-12c

Exhibit 4-12c Newport’s Age of Plant Ratio for 20X0 and 20X1

		Age of		Accumulated		Depreciation
	Year	Plant	=	Depreciation	/	Expense

	20X1	7.25	=	$2,781,741	/	$383,493
	20X0	5.71	=	$2,398,248	/	$420,238

	Standard = 9.86

Ex 4-13Data

Exhibit 4-13 Newport Hospital’s Activity Ratios for 20X0 and 20X1 as Compared to the Standard

		20X0	20X1	Standard
	Total Asset Turnover	0.96	1.01	1.02
	Fixed Asset Turnover	2.41	2.56	3.59
	Average Age of Plant	5.71	7.25	9.86

Page &P

Ex 4-13Ch

1	1	1
2	3	4
6	7	10

20X0

20X1

Standard

Ex 4-13

Exhibit 4-13 Newport Hospital’s Activity Ratios for 20X0 and 20X1 as Compared to the Standard

Ex 4-13

1	1	1
2	3	4
6	7	10

20X0

20X1

Standard

Ex 4-14

Exhibit 4-15 Selected Capital Structure Ratios

	Ratio	Formula		Standard

	Long-Term Debt to Net Assets Ratio		Long-Term Debt	0.21
			Net Assets

	Net Assets to Total Assets Ratio		Net Assets	0.62
			Total Assets

		(Excess of Revenues over Expenses
	Times Interest Earned Ratio	+ Interest Expense)		2.85
		Interest Expense

		(Excess of Revenues over Expenses
	Debt Service Coverage Ratio	+ Interest Expense + Depreciation Expense)		3.35
		(Interest Expense + Principal Payments)

Ex 4-14a

Exhibit 4-14a Newport's Long-Term Debt to Net Assets Ratio for 20X0 and 20X1

		Long-Term Debt
	Year	to Net Assets	=	Long-Term Debt	/	Net Assets

	20X1	2.73	=	$6,938,891	/	$2,542,655
	20X0	3.14	=	$6,009,484	/	$1,911,683

	Standard = 0.21

Ex 4-14b

Exhibit 4-14 b Newport's Net Assets to Total Assets Ratio for 20X0 and 20X1

		Net Assets to
	Year	Total Assets	=	Net Assets	/	Total Assets

	20X1	0.23	=	$2,542,655	/	$10,876,736
	20X0	0.17	=	$1,911,683	/	$11,315,585

	Standard = 0.62

Ex 4-14c

Exhibit 4-14c Newport's Times Interest Earned Ratio for 20X0 and 20X1

		Times Interest		(Excess of Revenues
	Year	Earned	=	over Expenses	+	Interest Expense)	/	Interest Expense

	20X1	2.03	= (	$515,909	+	$500,000	) /	$500,000
	20X0	5.41	= (	$1,219,186	+	$276,379	) /	$276,379

	Standard = 2.85

Ex 4-14d

Exhibit 4-14d Newport's Debt Service Coverage Ratio for 20X0 and 20X1

	Steps 1-4
		Cash Flow		(Excess of Revenues		Interest		Depreciation
	Year	Before Interest	=	over Expenses	+	Expense	+	Expense)

	20X1	$1,399,402	= (	$515,909	+	$500,000	+	$383,493	)
	20X0	$1,915,803	= (	$1,219,186	+	$276,379	+	$420,238	)

	Step 5
		Debt Service		Cash Flow		(Interest		Principal
	Year	Coverage	=	Before Interest	/	Expense	+	Payments)

	20X1	2.00	=	$1,399,402	/ (	$500,000	+	$200,000	)
	20X0	4.02	=	$1,915,803	/ (	$276,379	+	$200,000	)

	Standard = 3.35

Ex 4-15Data

Exhibit 4-15 Newport Hospital’s Capital Structure Ratios for 20X0 and 20X1 as Compared to the Standard

		20X0	20X1	Standard
	Long-Term Debt to Net Assets	3.14	2.73	0.21
	Net Assets to Total Assets	0.17	0.23	0.62
	Times Interest Earned	5.41	2.03	2.85
	Debt Service Coverage	4.02	2.00	3.35

	Desired position is below standard for the long-term debt to equity ratio, organizationally dependent for the net asset to total asset ratio, and above standard for the last two ratios.

Page &P

Ex 4-15Data

0	0	0
0	0	0
0	0	0
0	0	0

Page &P

20X0

20X1

Standard

Ex 4-15Ch

3	3	0
0	0	1
5	2	3
4	2	3

20X0

20X1

Standard

Ex 4-15

Exhibit 4-15 Newport Hospital’s Capital Structure Ratios for 20X0 and 20X1 as Compared to the Standard

Ex 4-15

3	3	0
0	0	1
5	2	3
4	2	3

20X0

20X1

Standard

Ex 4-16a

Exhibit 4-16a Financial Ratios for All U.S. Hospitals by Bed Size

		HCIA & HCFA	HCIA & HCFA	HCIA & HCFA	HCIA & HCFA	HCIA & HCFA
		Median Ratio[1]	Median Ratio[1]	Median Ratio[1]	Median Ratio[1]	Median Ratio[1]	Desired
	Ratio	Hospital Industry	1-99 beds	100-249 bed	250-399 beds	400 and over	Position[2]
	Liquidity Ratios
	Current Ratio	2.06	2.18	1.95	1.94	1.84	Above
	Quick Ratio	1.69	1.76	1.57	1.54	1.48	Above
	Acid Test Ratio	0.26	0.35	0.31	0.31	0.11	Above
	Days in Accounts Receivable	66	67	65	64	68	Below
	Days Cash on Hand	47	46	43	44	45	Above
	Average Payment Period (Days)	58	54	66	69	67	Below
	Profitability Ratios
	Operating Margin	0.03	0.02	0.02	0.03	0.04	Above
	Non-Operating Revenue	0.05	0.05	0.04	0.06	0.09	Varies
	Return on Total Assets	0.04	0.03	0.04	0.05	0.04	Above
	Return on Net Assets	0.08	0.06	0.09	0.10	0.10	Above
	Activity Ratios
	Total Asset Turnover Ratio	0.93	1.02	0.85	0.79	0.81	Above
	Net Fixed Assets Turnover Ratio	3.50	3.59	3.45	3.44	3.62	Above
	Age of Plant Ratio	9.53	9.86	10.01	9.93	9.74	Below
	Capital Structure Ratios
	Long-Term Debt to Net Assets Ratio	0.38	0.21	0.48	0.56	0.64	Below
	Net Assets to Total Assets Ratio	0.60	0.62	0.56	0.55	0.52	Above
	Times Interest Earned Ratio	4.29	2.85	4.30	5.39	4.31	Above
	Debt Service Coverage Ratio	4.06	3.35	3.73	4.61	5.59	Above

	[1] These Standard ratios values were obtained from Health Care Financing Administration
	Hospital Cost Report Information System Files for financial statements ending in 1998.
	[2] These are true to a certain point. For example, for the acid test ratio, in general, the higher the better,
	but after a certain point, the organization might be better off investing some of the excess cash.

Ex 4-16b

Exhibit 4-16b Definition of Financial Ratios

	Liquidity Ratios	Formula
	Current Ratio	Current Assets / Current Liabilities
	Quick Ratio	(Cash + Marketable Securities + Net Receivables) / Current Liabilities
	Acid Test Ratio	(Cash + Marketable Securities) / Current Liabilities
	Days in Accounts Receivable	Net Patient Accounts Receivables / (Net Patient Revenues / 365)
	Days Cash on Hand	(Cash + Marketable Securities) / ((Operating Expenses - Depreciation Expense) / 365)
	Average Payment Period (Days)	Current Liabilities / ((Operating Expenses - Depreciation Expense) / 365)

	Profitability Ratios	Formula
	Operating Margin	Operating Income / Total Operating Revenues
	Non-operating Revenue Ratio	Non-operating Revenues and Other Income / Total Operating Revenues
	Return on Total Assets[1]	Excess of Revenues over Expenses / Total Assets
	Return on Net Assets[2]	Excess of Revenues over Expenses / Net Assets

	Activity Ratios	Formula
	Total Asset Turnover Ratio	Total Revenues / Total Assets
	Net Fixed Assets Turnover Ratio	Total Revenues / Net Plant and Equipment
	Age of Plant Ratio	Accumulated Depreciation / Depreciation Expense

	Capital Structure Ratios	Formula
	Long-Term Debt to Net Assets Ratio[3]	Long-Term Debt / Net Assets
	Net Assets to Total Assets Ratio[4]	Net Assets / Total Assets
	Times Interest Earned Ratio[5]	(Excess of Revenues over Expenses + Interest Expense) / Interest Expense
	Debt Service Coverage Ratio[6]	(Excess of Revenues over Expenses + Interest Expense + Depreciation Expense) /
		(Interest Expense + Principal Payments)

	[1] In for-profit health care organizations, caluclated as: Net Income / Total Assets
	[2] Called the Return on Equity in for-profit health care organizations, and calculated as: Net Income / Owners' Equity
	[3] Called Long-Term Debt to Equity in for-profit health care organizations, and calculated as: Long-Term Debt / Owners' Equity
	[4] Called Equity to Total Assets in for-profit health care organizations, and calculated as: Owners' Equity / Total Assets
	[5] In for-profit health care organizations, calculated as: Net Income + Interest Expense) / Interest Expense
	[6] In for-profit health care organizations, calculated as:
	(Net Income + Interest Expense + Depreciation Expense) / (Interst Expense + Principal Payments)

Ex 4-17

Exhibit 4-17 Selected Ratios for Glen Hall Hospital and the Industry Standards

		Industry	Glen Hall
	Profitibility Ratios	Standard	Hospital

	Operating Margin	0.041	(0.031)

	Return on Total Assets	0.075	0.024

	Non-Operating Ratio	0.040	0.104

Exhib 4-18x

Exhibit 4-18 Selected Ratios for and the Industry Standards

		Industry
	Profitibility Ratios	Standard

	Operating Margin

	Return on Total Assets

	Non-Operating Ratio

Ex 4-19a

Exhibit 4-19a Statement of Operations for Wynn Memorial Nursing Home

	Wynn Memorial Nursing Home
	Statement of Operations (in 000)
	For the Years Ended December 31, 2005 and 2004

		2005	2004
	Revenues:
	Net Patient Service Revenue	$1,400	$1,200
	Other Revenue	200	200
	Total Revenues	1,600	1,400


	Expenses:
	Nursing Services	1,320	1,150
	Administrative Services	110	100
	Depreciation	20	15
	General Services	50	35
	Total Expenses	1,500	1,300

	Operating Income	100	100
	Excess of Revenues over Expenses	100	100

	Increase in Net Assets	$100	$100

IM-P1

Balance Sheet for Wynn Memorial Nursing Home

	Wynn Memorial Nursing Home
	Balance Sheet (in 000)
	For the Years Ending December 31, 2009 and 2008

		2009	2008
	Current Assets:
	Cash and Cash Equivalents	$30	$50
	Net Patient Receivables	295	235
	Prepaid Expenses	80	80
	Total Current Assets	405	365

	Plant, Property, & Equipment
	Gross Plant, Property, & Equipment	350	300
	(less Accumulated Depreciation)	(70)	(50)
	Net Plant, Property, & Equipment	280	250

	Construction in Progress	203	0

	Total Assets	$888	$615

	Current Liabilities:
	Accounts Payable	$220	$190
	Salaries Payable	75	50
	Total Current Liabilities	295	240

	Long-Term Liabilities:
	Bonds Payable	100	20
	Total Long-Term Liabilities	100	20

	Net Assets	493	355

	Total Liabilities and Net Assets	$888	$615

Ex 4-20a

Exhibit 4-20a Statement of Operations for Maryville Community Hospital

	Maryville Community Hospital
	Statement of Operations (in '000)
	For the Years Ended December 31, 20X1 and 20X0

		20X1	20X0
	Revenues:
	Net Patient Service Revenue	$17,500	$18,000
	Net Assets Released from Restriction	2,000	100
	Other Revenue	500	450
	Total Revenues	20,000	18,550

	Expenses:
	Nursing S\ervices	13,000	15,000
	Administrative Services	5,000	3,000
	Depreciation	1,000	1,000
	General Services	200	100
	Total Expenses	19,200	19,100

	Operating Income	800	(550)
	Excess of Revenues over Expenses	800	(550)
	Transfer to Parent	500	0

	Increase (Decrease) in Net Assets	$300	($550)

Ex 4-20b

Exhibit 4-20b Balance Sheet for Maryville Community Hospital

	Maryville Community Hospital
	Balance Sheet (in '000)
	For the Years Ended December 31, 20X1 and 20X0

		20X1	20X0
	Current Assets:
	Cash and Cash Equivalents	$750	$650
	Net Patient Receivables	2,500	3,800
	Inventory	700	800
	Total Current Assets	3,950	5,250

	Plant, Property, & Equipment
	Gross Plant, Property, & Equipment	20,000	19,000
	(less Accumulated Depreciation)	(6,000)	(5,000)
	Net Plant, Property, & Equipment	14,000	14,000

	Board-Designated Funds	7,000	4,500

	Total Assets	24,950	23,750

	Current Liabilities:
	Accounts Payable	1,500	1,800
	Accrued Expenses	500	750
	Total Current Liabilities	2,000	2,550

	Long-Term Liabilities:
	Bonds Payable	10,500	11,000
	Total Long-Term Liabilities	10,500	11,000

	Net Assets	12,450	10,200

	Total Liabilities and Net Assets	$24,950	$23,750

Ex 4-21

Exhibit 4-21 Selected Financial Ratios for Hollywood Community Hospital

	Ratio	20X1	20X0

	Current Ratio	4.05	2.30
	Acid Test Ratio	0.95	0.20
	Days in Accounts Receivable	75 days	65 days
	Days Cash on Hand	25 days	5 days
	Average Payment Period (Days)	55 days	55 days

	Fixed Asset Turnover Ratio	3.45	2.60
	Total Asset Turnover Ratio	1.15	1.05

	Operating Margin	-0.05	0.02
	Return on Net Assets	0.01	0.06

	Long-Term Debt to Net Assets (Equity)	2.95	1.18
	Net Assets to Total Assets	0.34	0.46

	Age of Plant	5.05	5.78

Ex 4-22

Exhibit 4-22 Financial Ratios for McGill Healthcare System

	Ratio	12/31/20X1	12/31/20X0

	Current Ratio	1.75	2.50
	Quick Ratio	1.01	1.85
	Acid Test Ratio	0.15	0.35
	Days in Accounts Receivable	55 days	65 days
	Average Payment Period	40 days	45 days
	Days Cash on Hand	12 days	35 days

	Fixed Asset Turnover Ratio	0.95	3.20
	Total Asset Turnover Ratio	0.65	1.10

	Operating Margin	0.03	0.02
	Non-Operating Revenue	0.25	0.10
	Return on Assets	0.06	0.04

	Long-Term Debt to Equity	0.22	0.25
	Equity to Total Assets	0.65	0.35
	Debt Service Coverage Ratio	5.55	4.55

	Age of Plant	4.50	10.01

Ex 4-23

Exhibit 4-23 Financial Ratios for Hope Community Hospital

	Ratio	20X1	20X0

	Liquidity Ratios
	Current Ratio	1.78	1.81
	Quick Ratio	1.29	1.39
	Acid Test Ratio	0.23	0.18
	Average Collection Period	82 days	118 days
	Days Cash on Hand	19 days	17 days
	Average Payment Period (Days)	81 days	95 days

	Profitability Ratios
	Return on Total Assets	0.14	0.14
	Return on Net Assets	0.44	0.50
	Operating Margin	0.12	0.06
	Nonoperating Revenue	0.02	0.11

	Activity Ratios
	Total Asset Turnover Ratio	1.07	0.84
	Fixed Asset Turnover Ratio	1.96	1.46
	Age of Plant	13.00	11.00

	Capital Structure Ratios
	Net Assets to Total Assets	0.32	0.27
	Long-Term Debt to Net Assets	1.47	1.95
	Debt Service Coverage Ratio	1.50	1.53
	Times Interest Earned	4.00	4.10

Ex 4-24

Exhibit 4-24 St. Jude Hospital's Financial Ratios

	Ratio	20X1	20X0

	Current Ratio	2.10	2.20
	Acid Test Ratio	0.10	0.25
	Days in Accounts Receivable	60 days	45 days
	Days Cash on Hand	5 days	15 days
	Average Payment Period (Days)	45 days	43 days

	Fixed Asset Turnover Ratio	2.54	3.58
	Total Asset Turnover Ratio	1.04	1.10

	Operating Margin	0.03	0.10
	Return on Assets	0.12	0.20

	Long-Term Debt to Equity	2.18	1.10
	Equity to Total Assets	0	1
	Debt Service Coverage Ratio	2.10	3.20

	Age of Plant	3.50	5.70

Ex 4-25

Exhibit 4-25 Financial Ratios for Swayze Community Hospital

	Ratio	20X1	20X0

	Current Ratio	2.25	1.95
	Quick Ratio	1.65	1.45
	Acid Test Ratio	0.10	0.25
	Days in Accounts Receivable	80	50
	Average Payment Period	65	75
	Days Cash on Hand	15	35

	Fixed Asset Turnover Ratio	3.50	3.20
	Total Asset Turnover Ratio	1.12	1.10

	Operating Margin	0.08	0.06
	Return on Assets	0.10	0.07

	Long-Term Debt to Net Assets	0.55	0.68
	Net Assets to Total Assets	0.45	0.35
	Debt Service Coverage Ratio	3.55	2.25

	Age of Plant	7.80	6.80

Ex 4-26

Exhibit 4-26 Financial Ratios for Avon Hospital

	Ratio	20X1	20X0

	Current Ratio	0.50	1.60
	Acid Test Ratio	0.02	0.35
	Days in Accounts Receivable	120 days	80 days
	Average Payment Period	95 days	75 days
	Days Cash on Hand	5 days	15 days

	Fixed Asset Turnover	0.75	1.00
	Total Asset Turnover	0.95	1.20

	Operating Margin	-0.08	-0.01
	Return on Assets	-0.01	0.02

	Long-Term Debt to Equity	3.11	2.10
	Equity to Total Assets	0.10	0
	Debt Service Coverage Ratio	1.25	2.01

	Age of Plant	10.01	7.85

Ex 4-27a

Exhibit 4-27a Statement of Operations for Lake Community Hospital

	Lake Community Hospital
	Statement of Operations (in '000)
	For the Years Ended 12/31/20X1 and 12/31/20X0
		20X1	20X0
	Revenues:
	Net Patient Service Revenue	$20,000	$17,000
	Other Operating Revenue	2,500	2,000
	Total Revenues	22,500	19,000

	Operating Expenses:
	Nursing Services	12,000	10,000
	Administrative Services	4,000	3,500
	(includes Bad Debt Expense of $100)
	Depreciation	1,000	1,200
	General Services	2,500	2,500
	Fiscal Services	400	400
	Professional/Ancillary Services	3,500	3,000
	Interest	1,000	1,000
	Total Expenses	24,400	21,600

	Income from Operations	(1,900)	(2,600)
	Non-Operating Income:
	Investment Income / Contributions	3,000	3,000
	Excess of Revenues over Expenses	1,100	400

	Net Income	$1,100	$400

Ex 4-27b

Exhibit 4-27a Balance Sheet for Lake Community Hospital

	Lake Community Hospital
	Balance Sheet (in '000)
	For the Years Ended 12/31/20X1 and 12/31/20X0
		20X1	20X0
	Current Assets:
	Cash and Cash Equivalents	$1,300	$800
	Net Patient Accounts Receivables	3,500	4,000
	Inventories	2,000	1,800
	Other Current Assets	100	80
	Total Current Assets	6,900	6,680

	Plant, Property, & Equipment
	Gross Plant, Property, & Equipment	21,000	22,000
	(less Accumulated Depreciation)	(6,500)	(5,500)
	Net Property, Plant and Equipment	14,500	16,500

	Funded Depreciation / Board Designated Funds
	Cash and Short-Term Investments	4,000	1,500

	Total Assets	$25,400	$24,680


	Current Liabilities:
	Accounts Payable	$3,000	$3,200
	Salaries Payable	30	25
	Notes Payable	250	300
	Total Current Liabilities	3,280	3,525

	Long-Term Liabilities:
	Bonds Payable	15,000	18,000
	Total Long-Term Liabilities	15,000	18,000

	Net Assets	7,120	3,155

	Total Liabilities and Net Assets	$25,400	$24,680

Ex 4-28a

Exhibit 4-28a Pine Island Regional Hospital Statement of Operations

	Pine Island Regional Hospital
	Statement of Operations (in 000's)
	For the Years Ended 12/31/20X1 and 12/31/20X0

		12/31/20X1	12/31/20X0
	Revenues:
	Net Patient Service Revenue	$55,000	$62,000
	Net Assets Released from Restriction	5,000	4,000
	Other Operating Revenue	3,000	7,000
	Total Revenues	63,000	73,000

	Expenses:
	Nursing Services	20,000	25,000
	Administrative Services	18,000	22,000
	Depreciation	5,000	5,000
	Interest	4,000	4,000
	General Services	8,000	3,000
	Total Expenses	55,000	59,000

	Operating Income	8,000	14,000

	Excess of Revenues over Expenses	8,000	14,000

	Increase (Decrease) in Net Assets	$8,000	$14,000

Ex 4-28b

Exhibit 4-28b Pine Island Regional Hospital Balance Sheet

	Pine Island Regional Hospital
	Balance Sheet (in 000's)
	For the Years Ended 12/31/20X1 and 12/31/20X0

		12/31/20X1	12/31/20X0
	Current Assets:
	Cash and Cash Equivalents	$4,200	$4,750
	Net Patient Receivables	6,000	6,500
	Inventory	300	250
	Prepaid Expenses	750	800
	Total Current Assets	11,250	12,300

	Plant, Property, & Equipment
	Gross Plant, Property, & Equipment	55,000	60,000
	(less Accumulated Depreciation)	(30,000)	(25,000)
	Net Property, Plant and Equipment	25,000	35,000

	Long-Term Investments	2,000	1,500

	Total Assets	$38,250	$48,800


	Current Liabilities:
	Accounts Payable	$5,500	$4,800
	Salaries Payable	1,075	950
	Total Current Liabilities	6,575	5,750

	Long-Term Liabilities:
	Bonds Payable	20,000	25,000
	Total Long-Term Liabilities	20,000	25,000

	Net Assets	11,675	18,050

	Total Liabilities and Net Assets	$38,250	$48,800

Ex 4-29a

Exhibit 4-29a Rocky Mountain Resort Hospital Statement of Operations

	Rocky Mountain Resort Hospital
	Statement of Operations (in 000's)
	For the Years Ended 12/31/20X1 and 12/31/20X0

		12/31/20X1	12/31/20X0
	Revenues:
	Net Patient Service Revenue	$45,000	$30,000
	Net Assets Released from Restriction	12,000	9,000
	Other Operating Revenue	10,000	7,000
	Total Revenues	67,000	46,000

	Expenses:
	Nursing Services	33,000	31,000
	Administrative Services	13,000	8,000
	Depreciation Expense	8,000	4,000
	Interest Expense	4,000	500
	General Services	5,000	4,000
	Total Expenses	63,000	47,500

	Operating Income	4,000	(1,500)

	Excess of Revenues over Expenses	4,000	(1,500)

	Increase (Decrease) in Net Assets	$4,000	($1,500)

Ex 4-29b

Exhibit 4-29b Rocky Mountain Resort Hospital Balance Sheet

	Rocky Mountain Resort Hospital
	Balance Sheet (in 000's)
	For the Years Ended 12/31/20X1 and 12/31/20X0

		12/31/20X1	12/31/20X0
	Current Assets:
	Cash and Cash Equivalents	$3,800	$8,750
	Net Patient Receivables	15,000	11,500
	Inventory	2,300	1,250
	Prepaid Expenses	5,500	4,500
	Total Current Assets	26,600	26,000

	Plant, Property, & Equipment
	Gross Plant, Property, & Equipment	65,000	40,000
	(less Accumulated Depreciation)	(20,000)	(15,000)
	Net Property, Plant and Equipment	45,000	25,000

	Long-Term Investments	2,000	10,500

	Total Assets	$73,600	$61,500


	Current Liabilities:
	Accounts Payable	$8,500	$3,800
	Salaries Payable	950	700
	Total Current Liabilities	9,450	4,500

	Long-Term Liabilities:
	Bonds Payable	40,000	5,000
	Total Long-Term Liabilities	40,000	5,000

	Net Assets	24,150	52,000

	Total Liabilities and Net Assets	$73,600	$61,500

Ex 4-30a

Exhibit 4-30a Balance Sheet for Williamson Academic Medical Center

	Williamson Academic Medical Center
	Balance Sheet (in '000)
	For the Years Ended December 31, 20X0 and 20X1

		12/31/20X1	12/31/20X0
	Current Assets:
	Cash & Cash Equivalents	$1,000	$800
	Patient Accounts Receivables, Net	4,500	5,500
	Inventories	2,000	1,800
	Other Current Assets	100	80
	Total Current Assets	7,600	8,180

	Plant, Property, & Equipment
	Gross Plant, Property, & Equipment	18,000	18,500
	(less Accumulated Depreciation)	(6,500)	(5,500)
	Net Property, Plant and Equipment	11,500	13,000

	Long-Term Investments	2,000	1,500

	Total Assets	$21,100	$22,680


	Current Liabilities:
	Accounts Payable	$4,000	$4,200
	Salaries Payable	30	25
	Notes payable	250	300
	Other Current Liabilities	0	0
	Total Current Liabilities	4,280	4,525

	Non-Current Liabilities:
	Bonds Payable	10,000	12,000
	Total Non-Current Liabilities	10,000	12,000

	Net Assets	6,820	6,155

	Total Liabilities and Net Assets	$21,100	$22,680

Ex 4-30b

Exhibit 4-30b Income Statement for Williamson Academic Medical Center

	Williamson Academic Medical Center
	Income Statement (in '000)
	For the Years Ended December 31, 20X0 and 20X1

		12/31/20X1	12/31/20X0
	Revenues:
	Net Patient Revenues	$20,000	$17,000
	Other Operating Revenues	2,500	2,000
	Total Revenues	22,500	19,000

	Expenses:
	Nursing Services	8,000	7,000
	Administrative Services	4,000	3,500
	(includes bad debt expense of $100,000)
	Depreciation	500	500
	General Services	2,500	2,500
	Fiscal Services	400	400
	Professional/Ancillary Services	3,500	3,000
	Interest	1,000	1,000
	Total Expenses	19,900	17,900

	Income from Operations	2,600	1,100
	Non-Operating Income:
	Investment Income + Contributions	400	2,000

	Excess of Revenues over Expenses	3,000	3,100

	Increase (Decrease) in Net Assets	$3,000	$3,100

Q4.1a-

Q4.2-4.3

2. Horizontal analysis compares changes in a given line item between two consecutive periods (i.e., Cash in 20X0 vs. 20X1). Vertical analysis compares the relative weight of various line items to a base (i.e., current assets as a percent of total assets)

Q4.4

4. The purpose of ratio analysis is to provide information about the financial performance of an organization which goes beyond that which is available from analyzing only one line item at a time. Ratios are generally grouped into four categories: Liquidi

Q4.5-4.6

5. Whether an industry median is an appropriate standard depends upon: 1) how similar the comparison group is to the organization; 2) how well the comparison group is doing; and 3) the goals of the organization. In the first instance, an organization may

6. The Current, Quick, and Acid Test ratios all reflect some combination of current assets as a percentage of the current liabilities. The calculated values provide minimal information about the timing of cash flows. The Average Payment Period ratio shows

Q4.7-4.8

7. Capital structure ratios help analyze the organization’s ability to pay off its long-term debts. Liquidity ratios help to analyze the organization’s ability to pay off its short-term obligations. Increasing activity but declining profitability would o

Q4.9-4.10

9. Debt service coverage ratio measures how much cash flow an organization has to meet debt service payments. 10. Health care providers with higher age of plant ratio values would have older assets.

Pr 4.11

Problem 4.11 Glen Hall Hospital

		Industry	Glen Hall
	Profitibility Ratios	Standard	Hospital	Formula

	Operating Margin	0.041	(0.031)	Operating Income / Total Operating Revenues

	Return on Total Assets	0.075	0.024	Excess of Revenues over Expenses / Total Assets

	Non-Operating Ratio	0.040	0.104	Non-operating Revenues and Other Income / Total Operating Revenues


	Operating Margin is negative, suggesting a loss from operations (expenses exceed revenues).
	Return on Total Assets is low, suggesting that revenues are inadequate.
	Non-Operating Ratio is also low, suggesting that revenues from other sources is scarce.

	In short, it appears that operating and non-operating revenues for Glen Hall are both too low,
	that assets are not being used wisely, and that the hospital is headed for Chapter 11.

Prob 4.12x

Problem 4.12

	Replace with Exhibit 4-18 after it gets finished, and modify

Pr 4.13

Problem 4.13 Dogwood Hospital

		A	B	C		D	E	F	G
	(in '000)
		12/31/20X1	12/31/20X0	Standard		20X1	20X1	20X0	20X0
	Ratio1	[D/E]	[F/G]	[Given]		Numerator	Denominator	Numerator	Denominator

	Current Ratio	1.37	1.52	1.95		$405	$295	$365	$240
	Acid Test Ratio	0.10	0.21	0.31		$30	$295	$50	$240
	Days in Accounts Receivable	77	71	65		$295	$3.84	$235	$3.29
	Average Payment Period (Days)	73	68	66		$295	$4.05	$240	$3.52

	Operating Margin	0.06	0.07	0.02		$100	$1,600	$100	$1,400
	Return on Total Assets	0.11	0.16	0.04		$100	$888	$100	$615

	Total Asset Turnover Ratio	1.80	2.28	0.85		$1,600	$888	$1,400	$615
	Fixed Asset Turnover Ratio	5.71	5.60	3.45		$1,600	$280	$1,400	$250

	Long-Term Debt to Net Assets	0.20	0.06	0.48		$100	$493	$20	$355
	Net Assets to Total Assets	0.56	0.58	0.56		$493	$888	$355	$615

	[1] Legend
	Liquidity	Current Ratio			Current Assets / Current Liabilities
		Acid Test Ratio			(Cash + Marketable Securities) / Current Liabilities
		Days in Accounts Receivable			Net Patient Accounts Receivables / (Net Patient Revenues / 365)
		Average Payment Period			Current Liabilities / ((Operating Expenses - Depreciation Expense) / 365)
	Profitability	Operating Margin			Operating Income / Total Operating Revenues
		Return on Total Assets			Excess of Revenues over Expenses / Total Assets
	Activity	Total Asset Turnover Ratio			Total Revenues / Total Assets
		Fixed Assets Turnover Ratio			Total Revenues / Net Plant and Equipment
	Capital Structure	Long-Term Debt to Net Assets			Long-Term Debt / Net Assets
		Net Assets to Total Assets			Net Assets / Total Assets

	Liquidity: Dogwood has some trouble meeting current obligations, and bills are taking longer to collect and pay out.
	Profitability: Quite profitable relative to the standard.
	Activity: Assets are being used efficiently. Revenues are high for a facility of its size.
	Capital Structure: Institution is well-leveraged.
	Comment on changes if Dogwood were 450 beds.

Pr 4.14

Problem 4.14 Maryville Hospital

		A	B	C		D	E	F	G
	(in '000)
		12/31/20X1	12/31/20X0	Standard		20X1	20X1	20X0	20X0
	Ratio[1]	[D/E]	[F/G]	[Given]		Numerator	Denominator	Numerator	Denominator

	Current Ratio	1.98	2.06	1.94		$3,950	$2,000	$5,250	$2,550
	Quick Ratio	1.63	1.75	1.54		$3,250	$2,000	$4,450	$2,550
	Acid Test Ratio	0.38	0.25	0.31		$750	$2,000	$650	$2,550
	Days in Accounts Receivable	52	77	64		$2,500	$48	$3,800	$49
	Days Cash on Hand	15	13	44		$750	$50	$650	$50
	Average Payment Period (Days)	40	51	69		$2,000	$50	$2,550	$50

	Operating Margin	0.04	-0.03	0.03		$800	$20,000	($550)	$18,550
	Non-Operating Revenue	0.13	0.03	0.06		$2,500	$20,000	$550	$18,550
	Return on Total Assets	0.03	-0.02	0.05		$800	$24,950	($550)	$23,750
	Return on Net Assets	0.06	-0.05	0.10		$800	$12,450	($550)	$10,200

	Total Asset Turnover Ratio	0.80	0.78	0.79		$20,000	$24,950	$18,550	$23,750
	Fixed Asset Turnover Ratio	1.43	1.33	3.44		$20,000	$14,000	$18,550	$14,000
	Age of Plant Ratio	6.00	5.00	9.93		$6,000	$1,000	$5,000	$1,000

	Long-Term Debt to Net Assets	0.84	1.08	0.56		$10,500	$12,450	$11,000	$10,200
	Net Assets to Total Assets	0.50	0.43	0.55		$12,450	$24,950	$10,200	$23,750

	[1] Legend
	Liquidity	Current Ratio			Current Assets / Current Liabilities
		Quick Ratio			(Cash + Marketable Securities + Net Receivables) / Current Liabilities
		Acid Test Ratio			(Cash + Marketable Securities) / Current Liabilities
		Days in Accounts Receivable			Net Patient Accounts Receivables / (Net Patient Revenues / 365)
		Days Cash on Hand			(Cash + Marketable Securities) / ((Operating Expenses - Depreciation Expense) / 365)
		Average Payment Period			Current Liabilities / ((Operating Expenses - Depreciation Expense) / 365)
	Profitability	Operating Margin			Operating Income / Total Operating Revenues
		Non-operating Revenue Ratio			Non-operating Revenues and Other Income / Total Operating Revenues
		Return on Total Assets			Excess of Revenues over Expenses / Total Assets
		Return on Net Assets			Excess of Revenues over Expenses / Net Assets
	Activity	Total Asset Turnover Ratio			Total Revenues / Total Assets
		Fixed Assets Turnover Ratio			Total Revenues / Net Plant and Equipment
		Age of Plant Ratio			Accumulated Depreciation / Depreciation Expense
	Capital Structure	Long-Term Debt to Net Assets Ratio			Long-Term Debt / Net Assets
		Net Assets to Total Assets Ratio			Net Assets / Total Assets

Pr 4.15

Problem 4.15 Hollywood Community Hospital

	Ratio	20X1	20X0	Standard	Formula

	Liquidity Ratios
	Current Ratio	4.05	2.30	1.95	Current Assets / Current Liabilities
	Acid Test Ratio	0.95	0.20	0.31	(Cash + Marketable Securities) / Current Liabilities
	Days in Accounts Receivable	75	65	65	Net Patient Accounts Receivables / (Net Patient Revenues / 365)
	Days Cash on Hand	25	5	43	Current Liabilities / ((Operating Expenses - Depreciation Expense) / 365)
	Average Payment Period (Days)	55	55	66	(Cash + Marketable Securities) / ((Operating Expenses - Depreciation Expense) / 365)

	Profitability Ratios
	Operating Margin	-0.05	0.02	0.02	Operating Income / Total Operating Revenues
	Return on Net Assets	0.01	0.06	0.09	Excess of Revenues over Expenses / Net Assets

	Activity Ratios
	Total Asset Turnover Ratio	1.15	1.05	0.85	Total Revenues / Total Assets
	Fixed Asset Turnover Ratio	3.45	2.60	3.45	Total Revenues / Net Plant and Equipment
	Age of Plant	5.05	5.78	10.01	Accumulated Depreciation / Depreciation Expense

	Capital Structure Ratios
	Long-Term Debt to Net Assets (Equity)	2.95	1.18	0.48	Long-Term Debt / Net Assets
	Net Assets to Total Assets	0.34	0.46	0.56	Net Assets / Total Assets

	Between 20X0 and 20X1, the hospital was in a much better position
	to meet short-term obligations. Though collection time increased,
	it was paying its bills, yet still retaining more liquidity than before.

	However, it appears that expenses now exceed revenues, and
	that the institution is more heavily into debt than before. In other
	words, the hospital is meeting needs more through borrowing,
	rather than through operational effectiveness. This is a problem.

Pr 4.16

Problem 4.16 McGill Healthcare System

	Ratio	20X1	20X0	Standard	Formula

	Current Ratio	1.75	2.50	1.84	Current Assets / Current Liabilities
	Quick Ratio	1.01	1.85	1.48	(Cash + Marketable Securities + Net Receivables) / Current Liabilities
	Acid Test Ratio	0.15	0.35	0.11	(Cash + Marketable Securities) / Current Liabilities
	Days in Accounts Receivable	55	65	68	Net Patient Accounts Receivables / (Net Patient Revenues / 365)
	Days Cash on Hand	12	35	45	(Cash + Marketable Securities) / ((Operating Expenses - Depreciation Expense) / 365)
	Average Payment Period (Days)	40	45	67	Current Liabilities / ((Operating Expenses - Depreciation Expense) / 365)

	Operating Margin	0.03	0.02	0.04	Operating Income / Total Operating Revenues
	Non-Operating Revenue	0.25	0.10	0.09	Non-operating Revenues and Other Income / Total Operating Revenues
	Return on Assets	0.06	0.04	0.04	Excess of Revenues over Expenses / Total Assets

	Total Asset Turnover Ratio	0.65	1.10	0.81	Total Revenues / Total Assets
	Fixed Asset Turnover Ratio	0.95	3.20	3.62	Total Revenues / Net Plant and Equipment
	Age of Plant	4.50	10.01	9.74	Accumulated Depreciation / Depreciation Expense

	Long-Term Debt to Equity	0.22	0.25	0.64	Long-Term Debt / Net Assets
	Equity to Total Assets	0.65	0.35	0.52	Net Assets / Total Assets
	Debt Service Coverage Ratio	5.55	4.55	5.59	(Excess of Revenues over Expenses + Interest Expense + Depreciation Expense) /
					(Interest Expense + Principal Payments)

	McGill Healthcare System is in an interesting financial position, generally positive.

	Liquidity ratios for McGill sugest that its ability to meet short-term obligations has decreased; the Quick Ratio dropped
	precipitously and Days Cash on Hand has fallen quite low. However, receivables are being collected more efficiently,
	and bills are being paid more quickly, so meeting current obligations shouldn't pose a problem.

	McGill's operating margin is improving; though high, non-operating revenues only tend to be a fraction of total revenues.
	Revenues as a measure of investments are quite low, but it appears that most equipment is fairly new, so there is
	current opportunity to take advantage of a fairly new infrastructure to increase total revenues. Additionally, long-term
	debt is quite low, so McGill could always borrow as need be if the need arose.

Pr 4.17

Problem 4.17 Hope Community Hospital

	Ratio	20X1	20X0	Standard[1]	Formula

	Liquidity Ratios
	Current Ratio	1.78	1.81	2.06	Current Assets / Current Liabilities
	Quick Ratio	1.29	1.39	1.69	(Cash + Marketable Securities + Net Receivables) / Current Liabilities
	Acid Test Ratio	0.23	0.18	0.26	(Cash + Marketable Securities) / Current Liabilities
	Average Collection Period (Days)	82	118	66	Net Patient Accounts Receivables / (Net Patient Revenues / 365)
	Days Cash on Hand	19	17	47	(Cash + Marketable Securities) / ((Operating Expenses - Depreciation Expense) / 365)
	Average Payment Period (Days)	81	95	58	Current Liabilities / ((Operating Expenses - Depreciation Expense) / 365)

	Profitability Ratios
	Operating Margin	0.12	0.06	0.03	Operating Income / Total Operating Revenues
	Non-operating Revenue	0.02	0.11	0.05	Non-operating Revenues and Other Income / Total Operating Revenues
	Return on Total Assets	0.14	0.14	0.04	Excess of Revenues over Expenses / Total Assets
	Return on Net Assets	0.44	0.50	0.08	Excess of Revenues over Expenses / Net Assets

	Activity Ratios
	Total Asset Turnover Ratio	1.07	0.84	0.93	Total Revenues / Total Assets
	Fixed Asset Turnover Ratio	1.96	1.46	3.50	Total Revenues / Net Plant and Equipment
	Age of Plant	13.00	11.00	9.53	Accumulated Depreciation / Depreciation Expense

	Capital Structure Ratios
	Long-Term Debt to Net Assets	1.47	1.95	0.38	Long-Term Debt / Net Assets
	Net Assets to Total Assets	0.32	0.27	0.60	Net Assets / Total Assets
	Times Interest Earned	4.00	4.10	4.29	(Excess of Revenues over Expenses + Interest Expense) / Interest Expense
	Debt Service Coverage Ratio	1.50	1.53	4.06	(Excess of Revenues over Expenses + Interest Expense + Depreciation Expense) /
					(Interest Expense + Principal Payments)
	[1] Because the size of the facility is unknown, industry-wide median ratios are used.

	In general, Hope Community's liquidity position improved: while as able
	to meet current obligations as before, collection time has decreased,
	and bills are being paid in a more timely manner.

	Assets are being used well, and the institution is profitable. In addition,
	Hope is not as highly leveraged before. However, it appears that its
	durable equipment is aging, which implies the need to make some
	major investments in the near future to continue to operate effectively.

Pr 4.18

Problem 4.18 St. Jude's Hospital

	Ratio	20X1	20X0	Standard[1]	Formula

	Liquidity Ratios
	Current Ratio	2.10	2.20	2.06	Current Assets / Current Liabilities
	Acid Test Ratio	0.10	0.25	0.26	(Cash + Marketable Securities) / Current Liabilities
	Days in Accounts Receivable	60	45	66	Net Patient Accounts Receivables / (Net Patient Revenues / 365)
	Days Cash on Hand	5	15	47	(Cash + Marketable Securities) / ((Operating Expenses - Depreciation Expense) / 365)
	Average Payment Period (Days)	45	43	58	Current Liabilities / ((Total Expenses - Depreciation Expense) / 365)

	Profitability Ratios
	Operating Margin	0.03	0.10	0.03	Operating Income / Total Operating Revenues
	Return on Total Assets	0.12	0.20	0.04	Excess of Revenues over Expenses / Total Assets

	Activity Ratios
	Total Asset Turnover Ratio	1.04	1.10	0.93	Total Revenues / Total Assets
	Fixed Asset Turnover Ratio	2.54	3.58	3.50	Total Revenues / Net Plant and Equipment
	Age of Plant	3.50	5.70	9.53	Accumulated Depreciation / Depreciation Expense

	Capital Structure Ratios
	Long-Term Debt to Equity	2.18	1.10	0.38	Long-Term Debt / Equity
	Equity to Total Assets	0.42	0.55	0.60	Equity / Total Assets
	Debt Service Coverage Ratio	2.10	3.20	4.06	(Excess of Revenues over Expenses + Interest Expense + Depreciation Expense) /
					(Interest Expense + Principal Payments)

	[1] Because the size of the facility is unknown, industry-wide median ratios are used.

	St. Jude's' ability to meet short-term obligations decreased from
	20X0 to 20X1, collection time increased, and it could only
	survive on its own for a few days without external revenues.
	Time to pay bills has also increased slightly.

	Assets are being used less effectively, and the returns on
	investment have diminished as well, suggesting revenues are
	having a harder time offsetting expenses.

	Last, the hospital is more highly leveraged than before. All this
	suggests that the hospitral is headed for Chapter 11.

Pr 4.19

Problem 4.19 Swayze Community Hospital

	Ratio	20X1	20X0	Standard	Formula

	Current Ratio	2.25	1.95	1.94	Current Assets / Current Liabilities
	Quick Ratio	1.65	1.45	1.54	(Cash + Marketable Securities + Net Receivables) / Current Liabilities
	Acid Test Ratio	0.10	0.25	0.31	(Cash + Marketable Securities) / Current Liabilities
	Days in Accounts Receivable	80	50	64	Net Patient Accounts Receivables / (Net Patient Revenues / 365)
	Days Cash on Hand	15	35	44	(Cash + Marketable Securities) / ((Operating Expenses - Depreciation Expense) / 365)
	Average Payment Period (Days)	65	75	69	Current Liabilities / ((Operating Expenses - Depreciation Expense) / 365)

	Operating Margin	0.08	0.06	0.03	Operating Income / Total Operating Revenues
	Return on Assets	0.10	0.07	0.05	Excess of Revenues over Expenses / Total Assets

	Total Asset Turnover Ratio	1.12	1.10	0.79	Total Revenues / Total Assets
	Fixed Asset Turnover Ratio	3.50	3.20	3.44	Total Revenues / Net Plant and Equipment
	Age of Plant	7.80	6.80	9.93	Accumulated Depreciation / Depreciation Expense

	Long-Term Debt to Net Assets	0.55	0.68	0.56	Long-Term Debt / Net Assets
	Net Assets to Total Assets	0.45	0.35	0.55	Net Assets / Total Assets
	Debt Service Coverage Ratio	3.55	2.25	4.61	(Excess of Revenues over Expenses + Interest Expense + Depreciation Expense) /
					(Interest Expense + Principal Payments)

	Swayze is in good financial shape, but there is the opportunity for some improvement.

	Current obligations should be met without difficulty, but the low Acid Test Ratio and Days Cash on Hand suggest
	that perhaps more cash should be kept on hand. There is no evidence that Swayze has a parent corporation,
	but if so, the parent could always step in as need be. While debts are being paid off faster, bills are being collected slower.

	Swayze has a healthy margin/return on its assets and investments, significantly above the average for hospitals
	of similar size. Revenues are strong, and equipment won't need replacing for a while. Furthermore, Swayze has
	lowered its debt and increased Net Assets, suggesting that it could easily borrow capital when the need arises.

Pr 4.20

Problem 4.20 Avon Hospital

	Ratio	20X1	20X0	Standard	Formula

	Current Ratio	0.50	1.60	2.18	Current Assets / Current Liabilities
	Acid Test Ratio	0.02	0.35	0.35	(Cash + Marketable Securities) / Current Liabilities
	Days in Accounts Receivable	120	80	67	Net Patient Accounts Receivables / (Net Patient Revenues / 365)
	Days Cash on Hand	5	15	46	(Cash + Marketable Securities) / ((Operating Expenses - Depreciation Expense) / 365)
	Average Payment Period (Days)	95	75	54	Current Liabilities / ((Operating Expenses - Depreciation Expense) / 365)

	Operating Margin	-0.08	-0.01	0.02	Operating Income / Total Operating Revenues
	Return on Assets	-0.01	0.02	0.03	Excess of Revenues over Expenses / Total Assets

	Total Asset Turnover	0.95	1.20	1.02	Total Revenues / Total Assets
	Fixed Asset Turnover	0.75	1.00	3.59	Total Revenues / Net Plant and Equipment
	Age of Plant	10.01	7.85	9.86	Accumulated Depreciation / Depreciation Expense

	Long-Term Debt to Equity	3.11	2.10	0.21	Long-Term Debt / Net Assets
	Equity to Total Assets	0.10	0	0.62	Net Assets / Total Assets
	Debt Service Coverage Ratio	1.25	2.01	3.35	(Excess of Revenues over Expenses + Interest Expense + Depreciation Expense) /
					(Interest Expense + Principal Payments)

	Avon Hospital has one foot in the grave, and the dirt under the other foot is starting to crumble.
	If this institution were once a castle, it was a castle made of sand.

	Avon is in danger of no longer being able to meet its current obligations. It is inept at being able
	to collect its bills, it is taking increasingly and unacceptably longer to pay off its debts, and it
	barely has the funds to survive on its own for only a few days.

	The institution is rapidly losing money, its assets are being used inefficiently, and it is very highly
	leveraged. In addition, its equipment is getting old and in need of replacement, but there is noplace
	else from which to draw funds. The only hope for this institution is for a governmental bailout,
	or else to be bought out by a conglomerate which has the funds necessary to turn it around.

Pr 4.21a

Problem 4.21a Lake Community Hospital

	Lake Community Hospital
	Statement of Operations (Horizontal and Vertical Analyses) (in '000)
	For the Years Ended 12/31/20X1 and 12/31/20X0
			% of Total		% of Total	% Change
		20X1	Revenues	20X0	Revenues	20X0-20X1
	Revenues:
	Net Patient Service Revenue	$20,000	89%	$17,000	89%	18%
	Other Operating Revenue	2,500	11%	2,000	11%	25%
	Total Revenues	22,500	100%	19,000	100%	18%

	Operating Expenses:
	Nursing Services	12,000	53%	10,000	53%	20%
	Administrative Services	4,000	18%	3,500	18%	14%
	(includes Bad Debt Expense of $100)
	Depreciation	1,000	4%	1,200	6%	-17%
	General Services	2,500	11%	2,500	13%	0%
	Fiscal Services	400	2%	400	2%	0%
	Professional/Ancillary Services	3,500	16%	3,000	16%	17%
	Interest	1,000	4%	1,000	5%	0%
	Total Expenses	24,400	108%	21,600	114%	13%

	Income from Operations	(1,900)	-8%	(2,600)	-14%	-27%
	Non-Operating Income:
	Investment Income / Contributions	3,000	13%	3,000	16%	0%
	Excess of Revenues over Expenses	1,100	5%	400	2%	175%

	Net Income	$1,100	5%	$400	2%	175%

Pr 4.21b

Problem 4.21b Lake Community Hospital

	Lake Community Hospital
	Balance Sheet (Horizontal and Vertical Analyses) (in '000)
	For the Years Ended 12/31/20X1 and 12/31/20X0
			% Total		% Total	% Change
		20X1	Assets	20X0	Assets	20X0-20X1
	Current Assets:
	Cash and Cash Equivalents	$1,300	5%	$800	3%	63%
	Net Patient Accounts Receivables	3,500	14%	4,000	16%	-13%
	Inventories	2,000	8%	1,800	7%	11%
	Other Current Assets	100	0%	80	0%	25%
	Total Current Assets	6,900	27%	6,680	27%	3%

	Plant, Property, & Equipment
	Gross Plant, Property, & Equipment	21,000	83%	22,000	89%	-5%
	(less Accumulated Depreciation)	(6,500)	-26%	(5,500)	-22%	18%
	Net Property, Plant and Equipment	14,500	57%	16,500	67%	-12%

	Funded Depreciation / Board Designated Funds
	Cash and Short-Term Investments	4,000	16%	1,500	6%	167%

	Total Assets	$25,400	100%	$24,680	100%	3%


	Current Liabilities:
	Accounts Payable	$3,000	12%	$3,200	13%	-6%
	Salaries Payable	30	0%	25	0%	20%
	Notes Payable	250	1%	300	1%	-17%
	Total Current Liabilities	3,280	13%	3,525	14%	-7%

	Long-Term Liabilities:
	Bonds Payable	15,000	59%	18,000	73%	-17%
	Total Long-Term Liabilities	15,000	59%	18,000	73%	-17%

	Net Assets	7,120	28%	3,155	13%	126%

	Total Liabilities and Net Assets	$25,400	100%	$24,680	100%	3%

Pr 4.21c

Problem 4.21c Lake Community Hospital

	Ratio	20X1	20X0	Standard	Formula

	Liquidity Ratios
	Current Ratio	2.10	1.90	1.95	Current Assets / Current Liabilities
	Quick Ratio	1.46	1.36	1.57	(Cash + Marketable Securities + Net Receivables) / Current Liabilities
	Acid Test Ratio	0.40	0.23	0.31	(Cash + Marketable Securities) / Current Liabilities
	Days in Accounts Receivable	64	86	65	Net Patient Accounts Receivables / (Net Patient Revenues / 365)
	Average Payment Period	51	63	43	Current Liabilities / ((Operating Expenses - Depreciation Expense) / 365)
	Days Cash on Hand	20	14	66	(Cash + Marketable Securities) / ((Operating Expenses - Depreciation Expense) / 365)

	Profitability Ratios
	Operating Margin	(0.08)	(0.14)	0.02	Operating Income / Total Operating Revenues
	Non-operating Revenue	0.13	0.16	0.04	Non-operating Revenues and Other Income / Total Operating Revenues
	Return on Total Assets	0.04	0.02	0.04	Excess of Revenues over Expenses / Total Assets
	Return on Net Assets	0.15	0.13	0.09	Excess of Revenues over Expenses / Net Assets

	Activity Ratios
	Total Asset Turnover Ratio	0.89	0.77	0.85	Total Revenues / Total Assets
	Fixed Asset Turnover Ratio	1.55	1.15	3.45	Total Revenues / Net Plant and Equipment
	Age of Plant	6.50	4.58	10.01	Accumulated Depreciation / Depreciation Expense

	Capital Structure Ratios
	Long-Term Debt to Net Assets	2.11	5.71	0.48	Long-Term Debt / Net Assets
	Net Assets to Total Assets	0.28	0.13	0.56	Net Assets / Total Assets
	Times Interest Earned	2.10	1.40	4.30	(Excess of Revenues over Expenses + Interest Expense) / Interest Expense
	Debt Service Coverage Ratio[1]	2.98	2.50	3.73	(Excess of Revenues over Expenses + Interest Expense + Depreciation Expense) /
					(Interest Expense + Principal Payments)
	[1] The debt service payments each year are $40,000.

	Though it is still losing money (negative operating margin), Lake's financial condition shows signs of improvement.
	Its debts are being paid off more quickly, collection time has decreased, and assets are being used more effectively.

	Lake is less highly leveraged than before, and its equipment should still last for a while. The institution has the
	opportunity to increase revenues and/or decrease costs and should be able to return to profitability.

Pr 4.22a

Problem 4-22a Pine Island Regional Hospital

	Pine Island Regional Hospital
	Balance Sheet (Horizontral and Vertical Analyses) (in 000's)
	For the Years Ended 12/31/20X1 and 12/31/20X0
			% Total		% Total	% Change
		12/31/20X1	Assets	12/31/20X0	Assets	20X0-20X1
	Current Assets:
	Cash and Cash Equivalents	$4,200	11%	$4,750	10%	-12%
	Net Patient Receivables	6,000	16%	6,500	13%	-8%
	Inventory	300	1%	250	1%	20%
	Prepaid Expenses	750	2%	800	2%	-6%
	Total Current Assets	11,250	29%	12,300	25%	-9%

	Plant, Property, & Equipment
	Gross Plant, Property, & Equipment	55,000	144%	60,000	123%	-8%
	(less Accumulated Depreciation)	(30,000)	-78%	(25,000)	-51%	20%
	Net Property, Plant and Equipment	25,000	65%	35,000	72%	-29%

	Long-Term Investments	2,000	5%	1,500	3%	33%

	Total Assets	$38,250	100%	$48,800	128%	-22%


	Current Liabilities:
	Accounts Payable	$5,500	14%	$4,800	13%	15%
	Salaries Payable	1,075	3%	950	2%	13%
	Total Current Liabilities	6,575	17%	5,750	15%	14%

	Long-Term Liabilities:
	Bonds Payable	20,000	52%	25,000	65%	-20%
	Total Long-Term Liabilities	20,000	52%	25,000	65%	-20%

	Net Assets	11,675	31%	18,050	47%	-35%

	Total Liabilities and Net Assets	$38,250	100%	$48,800	128%	-22%

Pr 4.22b

Problem 4-22b Pine Island Regional Hospital

	Pine Island Regional Hospital
	Statement of Operations (Horizontal and Vertical Analyses) (in 000's)
	For the Years Ended 12/31/20X1 and 12/31/20X0
			% of Total		% of Total	% Change
		12/31/20X1	Revenues	12/31/20X0	Revenues	20X0-20X1
	Revenues:
	Net Patient Service Revenue	$55,000	87%	$62,000	85%	-11%
	Net Assets Released from Restriction	5,000	8%	4,000	5%	25%
	Other Operating Revenue	3,000	5%	7,000	10%	-57%
	Total Revenues	63,000	100%	73,000	100%	-14%

	Expenses:
	Nursing Services	20,000	32%	25,000	34%	-20%
	Administrative Services	18,000	29%	22,000	30%	-18%
	Depreciation	5,000	8%	5,000	7%	0%
	Interest	4,000	6%	4,000	5%	0%
	General Services	8,000	13%	3,000	4%	167%
	Total Expenses	55,000	87%	59,000	81%	-7%

	Operating Income	8,000	13%	14,000	19%	-43%

	Excess of Revenues over Expenses	8,000	13%	14,000	19%	-43%

	Increase (Decrease) in Net Assets	$8,000	13%	$14,000	19%	-43%

Pr 4.22c

Problem 4.22c Pine Island Regional Hospital

	Ratio	20X1	20X0	Standard	Formula

	Liquidity Ratios
	Current Ratio	1.71	2.14	1.94	Current Assets / Current Liabilities
	Quick Ratio	1.55	1.96	1.54	(Cash + Marketable Securities + Net Receivables) / Current Liabilities
	Acid Test Ratio	0.64	0.83	0.31	(Cash + Marketable Securities) / Current Liabilities
	Days in Accounts Receivable	40	38	64	Net Patient Accounts Receivables / (Net Patient Revenues / 365)
	Days Cash on Hand	31	32	44	(Cash + Marketable Securities) / ((Operating Expenses - Depreciation Expense) / 365)
	Average Payment Period (Days)	48	39	69	Current Liabilities / ((Operating Expenses - Depreciation Expense) / 365)

	Profitability Ratios
	Operating Margin	0.127	0.192	0.031	Operating Income / Total Operating Revenues
	Non-operating Revenue	0.000	0.000	0.058	Non-operating Revenues and Other Income / Total Operating Revenues
	Return on Total Assets	0.209	0.287	0.045	Excess of Revenues over Expenses / Total Assets
	Return on Net Assets	0.685	0.776	0.097	Excess of Revenues over Expenses / Net Assets

	Activity Ratios
	Total Asset Turnover Ratio	1.65	1.50	0.79	Total Revenues / Total Assets
	Fixed Asset Turnover Ratio	2.52	2.09	3.44	Total Revenues / Net Plant and Equipment
	Age of Plant	6.00	5.00	9.93	Accumulated Depreciation / Depreciation Expense

	Capital Structure Ratios
	Long-Term Debt to Net Assets	1.71	1.39	0.56	Long-Term Debt / Net Assets
	Net Assets to Total Assets	0.31	0.37	0.55	Net Assets / Total Assets
	Times Interest Earned	3.00	4.50	5.39	(Excess of Revenues over Expenses + Interest Expense) / Interest Expense
	Debt Service Coverage Ratio[1]			4.61	(Excess of Revenues over Expenses + Interest Expense + Depreciation Expense) /
					(Interest Expense + Principal Payments)
	[1] Annual principal payments are $000/year.

Pr 4-22

Pine Island Regional Hospital				Pine Island Regional Hospital				Pine Island Community Hospital					Pine Island Community Hospital					Pine Island Community Hospital
Statement of Activities (000's)				Balance Sheet (Horizontal Analysis) (000's)				Financial Ratios					Statement of Activities (Vertical Analysis) (000's)					Balance Sheet (Horizontal Analysis) (000's)
For Periods Ended 12/31/20X1 and 12/31/20X0				For Periods Ended 12/31/20X1 and 12/31/20X0				For Periods Ended 12/31/20X1 and 12/31/20X0					For Periods Ended 12/31/20X1 and 12/31/20X0					For Periods Ended 12/31/20X1 and 12/31/20X0
			Horizontal				Horizontal
			Analysis				Analysis		12/31/20X1	12/31/20X0	12/31/20X1 Formula	12/31/20X0 Formula			Vertical		Vertical			Vertical		Vertical
			% Change				% Change	Current Ratio	1.711	2.139	$11,250/ $6,575	$12,300/ $5,750		12/31/20X1	Analysis	12/31/20X0	Analysis	Assets	12/31/20X1	Analysis	12/31/20X0	Analysis
	12/31/20X1	12/31/20X0	20X0->20X1	Assets	12/31/20X1	12/31/20X0	20X0->20X1	Quick Ratio	1.551	1.957	($4,200+6,000)/$6,575	($4,750+6,500)/$5,750						Current Assets
				Current Assets				Acid Test Ratio	0.639	0.826	$4,200/$6,575	$4,750/$5,750	Net Patient Service Revenue	$55,000	87%	$62,000	85%	Cash and Cash Equivalents	$4,200	11%	$4,750	10%
Net Patient Service Revenue	$55,000	$62,000	-11%	Cash and Cash Equivalents	$4,200	$4,750	-12%	Days in Accounts Receivable	39.818	38.266	$6,000/$150.68493	$6,500/$169.86301	Net Assets Released from Restriction	5,000	8%	4,000	5%	Net Patient Receivables	6,000	16%	6,500	13%
Net Assets Released from Restriction	5,000	4,000	25%	Net Patient Receivables	6,000	6,500	-8%	(revenues per day)	150.685	169.863	$55,000/365	$62,000/365	Other Operating Revenue	3,000	5%	7,000	10%	Inventory	300	1%	250	1%
Other Operating Revenue	3,000	7,000	-57%	Inventory	300	250	20%						Total Revenues	63,000	100%	73,000	100%	Prepaid Expenses	750	2%	800	2%
Total Revenues	63,000	73,000	-14%	Prepaid Expenses	750	800	-6%	Average Payment Period	47.998	38.866	$6,575/$136.98630	$5,750/$147.94521						Total Current Assets	11,250	29%	12,300	25%
				Total Current Assets	11,250	12,300	-9%	(operating expenses-depreciation expense)/365	136.986	147.945	($55,000-$5,000)/365	($59,000-$5,000)/365	Expenses
Expenses								Days Cash on Hand	30.660	32.106	$4,200/$136.98630	$4,750/$147.94521	Nursing Services	20,000	32%	25,000	34%	Property, Plant and Equipment
Nursing Services	20,000	25,000	-20%	Property, Plant and Equipment									Administrative Services	18,000	29%	22,000	30%	Gross Property, Plant and Equipment	55,000	144%	60,000	123%
Administrative Services	18,000	22,000	-18%	Gross Property, Plant and Equipment	55,000	60,000	-8%	Fixed Asset Turnover	2.520	2.086	$63,000/ $25,000	$73,000/$35,000	Depreciation	5,000	8%	5,000	7%	(less Accumulated Depreciation)	30,000	78%	25,000	51%
Depreciation	5,000	5,000	0%	(less Accumulated Depreciation)	30,000	25,000	20%	Total Asset Turnover	1.647	1.496	$63,000/ $38,250	$73,000/$48,800	Interest	4,000	6%	4,000	5%	Net Property, Plant and Equipment	25,000	65%	35,000	72%
Interest	4,000	4,000	0%	Net Property, Plant and Equipment	25,000	35,000	-29%	Age of Plant	6.000	5.000	$30,000/$5,000	$25,000/$5,000	General Services	8,000	13%	3,000	4%
General Services	8,000	3,000	167%										Total Expenses	55,000	87%	59,000	81%	Long-Term Investments	2,000	5%	1,500	3%
Total Expenses	55,000	59,000	-7%	Long-Term Investments	2,000	1,500	33%	Operating Margin	0.127	0.192	$8,000/$63,000	$14,000/$73,000						Total Assets	$38,250	100%	$48,800	100%
				Total Assets	$38,250	$48,800	-22%	Return on Assets	0.209	0.287	$8,000/$38,250	$14,000/$48,800	Operating Income	8,000	13%	14,000	19%
Operating Income	8,000	14,000	-43%					Return on Equity	0.685	0.776	$8,000/$11,675	$14,000/$18,050	Excess of Revenues over Expenses	8,000	13%	14,000	19%
Excess of Revenues over Expenses	8,000	14,000	-43%	Liabilities and Net Assets				Non-Operating Revenue Ratio	0.079	0.055	$5,000/$63,000	$4,000/$73,000						Liabilities and Net Assets
				Current Liabilities				Long-Term Debt to Equity (Net Assets)	1.713	1.385	$20,000/$11,675	$25,000/$18,050	Increase (Decrease) in Net Assets	$8,000	13%	$14,000	19%	Current Liabilities
Increase (Decrease) in Net Assets	$8,000	$14,000	-43%	Accounts Payable	$5,500	$4,800	15%	Equity (Net Assets) to Total Assets	0.305	0.370	$11,675/$38,250	$18,050/$48,800						Accounts Payable	$5,500	14%	$4,800	10%
				Salaries Payable	1,075	950	13%	Debt Service Coverage Ratio	3.400	4.600	($8,000+5,000+4,000)/$5,000	($14,000+5,000+4,000)/$5,000						Salaries Payable	1,075	3%	950	2%
				Total Current Liabilities	6,575	5,750	14%	Times Interest Earned	3.000	4.500	($8,000+4,000)/$4,000	($14,000+4,000)/$4,000						Total Current Liabilities	6,575	17%	5,750	12%

				Long-Term Liabilities														Long-Term Liabilities
				Bonds Payable	20,000	25,000	-20%											Bonds Payable	20,000	52%	25,000	51%
				Total Long-Term Liabilities	20,000	25,000	-20%											Total Long-Term Liabilities	20,000	52%	25,000	51%

				Net Assets	11,675	18,050	-35%											Net Assets	11,675	31%	18,050	37%

				Total Liabilities and Net Assets	$38,250	$48,800	-22%											Total Liabilities and Net Assets	$38,250	100%	$48,800	100%

Pr 4.23a

Problem 4.23a Rocky Mountain Resort Hospital

	Rocky Mountain Resort Hospital
	Balance Sheet (Horizontal and Vertical Analyses) (in 000's)
	For the Years Ended 12/31/20X1 and 12/31/20X0
			% Total		% Total	% Change
		12/31/20X1	Assets	12/31/20X0	Assets	20X0-20X1
	Current Assets:
	Cash and Cash Equivalents	$3,800	5%	$8,750	14%	-57%
	Net Patient Receivables	15,000	20%	11,500	19%	30%
	Inventory	2,300	3%	1,250	2%	84%
	Prepaid Expenses	5,500	7%	4,500	7%	22%
	Total Current Assets	26,600	36%	26,000	42%	2%

	Plant, Property, & Equipment
	Gross Plant, Property, & Equipment	65,000	88%	40,000	65%	63%
	(less Accumulated Depreciation)	(20,000)	-27%	(15,000)	-24%	33%
	Net Property, Plant and Equipment	45,000	61%	25,000	41%	80%

	Long-Term Investments	2,000	3%	10,500	17%	-81%

	Total Assets	$73,600	100%	$61,500	100%	20%


	Current Liabilities:
	Accounts Payable	$8,500	12%	$3,800	6%	124%
	Salaries Payable	950	1%	700	1%	36%
	Total Current Liabilities	9,450	13%	4,500	7%	110%

	Long-Term Liabilities:
	Bonds Payable	40,000	54%	5,000	8%	700%
	Total Long-Term Liabilities	40,000	54%	5,000	8%	700%

	Net Assets	24,150	33%	52,000	85%	-54%

	Total Liabilities and Net Assets	$73,600	100%	$61,500	100%	20%

Pr 4.23b

Problem 4.23b Rocky Mountain Resort Hospital

	Rocky Mountain Resort Hospital
	Statement of Operations (Horizontal and Vertical Analyses) (in 000's)
	For the Years Ended 12/31/20X1 and 12/31/20X0
			% of Total		% of Total	% Change
		12/31/20X1	Revenues	12/31/20X0	Revenues	20X0-20X1
	Revenues:
	Net Patient Service Revenue	$45,000	67%	$30,000	65%	50%
	Net Assets Released from Restriction	12,000	18%	9,000	20%	33%
	Other Operating Revenue	10,000	15%	7,000	15%	43%
	Total Revenues	67,000	100%	46,000	100%	46%

	Expenses:
	Nursing Services	33,000	49%	31,000	67%	6%
	Administrative Services	13,000	19%	8,000	17%	63%
	Depreciation Expense	8,000	12%	4,000	9%	100%
	Interest Expense	4,000	6%	500	1%	700%
	General Services	5,000	7%	4,000	9%	25%
	Total Expenses	63,000	94%	47,500	103%	33%

	Operating Income	4,000	6%	(1,500)	-3%	-367%

	Excess of Revenues over Expenses	4,000	6%	(1,500)	-3%	-367%

	Increase (Decrease) in Net Assets	$4,000	6%	($1,500)	-3%	-367%

Pr 4.23c

Problem 4.23c Rocky Mountain Resort Hospital

	Ratio	20X1	20X0	Standard	Formula

	Liquidity Ratios
	Current Ratio	2.81	5.78	2.18	Current Assets / Current Liabilities
	Quick Ratio	1.99	4.50	1.76	(Cash + Marketable Securities + Net Receivables) / Current Liabilities
	Acid Test Ratio	0.40	1.94	0.35	(Cash + Marketable Securities) / Current Liabilities
	Days in Accounts Receivable	122	140	67	Net Patient Accounts Receivables / (Net Patient Revenues / 365)
	Days Cash on Hand	25	73	46	(Cash + Marketable Securities) / ((Operating Expenses - Depreciation Expense) / 365)
	Average Payment Period (Days)	63	38	54	Current Liabilities / ((Operating Expenses - Depreciation Expense) / 365)

	Profitability Ratios
	Operating Margin	0.06	(0.03)	0.02	Operating Income / Total Operating Revenues
	Non-operating Revenue	0.18	0.20	0.05	Non-operating Revenues and Other Income / Total Operating Revenues
	Return on Total Assets	0.05	(0.02)	0.03	Excess of Revenues over Expenses / Total Assets
	Return on Net Assets	0.17	(0.03)	0.06	Excess of Revenues over Expenses / Net Assets

	Activity Ratios
	Total Asset Turnover Ratio	0.91	0.75	1.02	Total Revenues / Total Assets
	Fixed Asset Turnover Ratio	1.49	1.84	3.59	Total Revenues / Net Plant and Equipment
	Age of Plant	2.50	3.75	9.86	Accumulated Depreciation / Depreciation Expense

	Capital Structure Ratios
	Long-Term Debt to Net Assets	1.66	0.10	0.21	Long-Term Debt / Net Assets
	Net Assets to Total Assets	0.33	0.85	0.62	Net Assets / Total Assets
	Times Interest Earned	2.00	(2.00)	2.85	(Excess of Revenues over Expenses + Interest Expense) / Interest Expense
	Debt Service Coverage Ratio[1]	3.56	1.67	3.35	(Excess of Revenues over Expenses + Interest Expense + Depreciation Expense) /
					(Interest Expense + Principal Payments)

	[1] 20X0: Total debt payments = $1,800, Interest Expense = $500; therefore, principal payment = $1,300
	20X1: Total debt payments = $4,500, Interest Expense = $4,000; therefore, principal payment = $500

	After having nearly been delivered a knockout punch, Rocky has come back strong.

Pr 4.24a

Problem 4.24a Williamson Academic Medical Center

	Williamson Academic Medical Center
	Balance Sheet (Horizontal and Vertical Analyses) (in '000)
	For the Years Ended December 31, 20X0 and 20X1
			% Total		% Total	% Change
		12/31/20X1	Assets	12/31/20X0	Assets	20X0-20X1
	Current Assets:
	Cash & Cash Equivalents	$1,000	5%	$800	4%	25%
	Patient Accounts Receivables, Net	4,500	21%	5,500	24%	-18%
	Inventories	2,000	9%	1,800	8%	11%
	Other Current Assets	100	0%	80	0%	25%
	Total Current Assets	7,600	36%	8,180	36%	-7%

	Plant, Property, & Equipment
	Gross Plant, Property, & Equipment	18,000	85%	18,500	82%	-3%
	(less Accumulated Depreciation)	(6,500)	-31%	(5,500)	-24%	18%
	Net Property, Plant and Equipment	11,500	55%	13,000	57%	-12%

	Long-Term Investments	2,000	9%	1,500	7%	33%

	Total Assets	$21,100	100%	$22,680	100%	-7%


	Current Liabilities:
	Accounts Payable	$4,000	19%	$4,200	19%	-5%
	Salaries Payable	30	0%	25	0%	20%
	Notes payable	250	1%	300	1%	-17%
	Other Current Liabilities	0	0%	0	0%	N/A
	Total Current Liabilities	4,280	20%	4,525	20%	-5%

	Non-Current Liabilities:
	Bonds Payable	10,000	47%	12,000	53%	-17%
	Total Non-Current Liabilities	10,000	47%	12,000	53%	-17%

	Net Assets	6,820	32%	6,155	27%	11%

	Total Liabilities and Net Assets	$21,100	100%	$22,680	100%	-7%

Pr 4.24b

Problem 4.24b Williamson Academic Medical Center

	Williamson Academic Medical Center
	Income Statement (Horizontal and Vertical Analyses) (in '000)
	For the Years Ended December 31, 20X0 and 20X1
			% of Total		% of Total	% Change
		12/31/20X1	Revenues	12/31/20X0	Revenues	20X0-20X1
	Revenues:
	Net Patient Revenues	$20,000	89%	$17,000	89%	18%
	Other Operating Revenues	2,500	11%	2,000	11%	25%
	Total Revenues	22,500	100%	19,000	100%	18%

	Expenses:
	Nursing Services	8,000	36%	7,000	37%	14%
	Administrative Services	4,000	18%	3,500	18%	14%
	(includes bad debt expense of $100,000)
	Depreciation	500	2%	500	3%	0%
	General Services	2,500	11%	2,500	13%	0%
	Fiscal Services	400	2%	400	2%	0%
	Professional/Ancillary Services	3,500	16%	3,000	16%	17%
	Interest	1,000	4%	1,000	5%	0%
	Total Expenses	19,900	88%	17,900	94%	11%

	Income from Operations	2,600	12%	1,100	6%	136%
	Non-Operating Income:
	Investment Income + Contributions	400	2%	2,000	11%	-80%

	Excess of Revenues over Expenses	3,000	13%	3,100	16%	-3%

	Increase (Decrease) in Net Assets	$3,000	13%	$3,100	16%	-3%

Pr 4.24c

Problem 4.24c Williamson Academic Medical Center

	Ratio	20X1	20X0	Standard	Formula

	Liquidity Ratios
	Current Ratio	1.78	1.81	1.84	Current Assets / Current Liabilities
	Quick Ratio	1.29	1.39	1.48	(Cash + Marketable Securities + Net Receivables) / Current Liabilities
	Acid Test Ratio	0.23	0.18	0.11	(Cash + Marketable Securities) / Current Liabilities
	Days in Accounts Receivable	82	118	68	Net Patient Accounts Receivables / (Net Patient Revenues / 365)
	Days Cash on Hand	19	17	45	(Cash + Marketable Securities) / ((Operating Expenses - Depreciation Expense) / 365)
	Average Payment Period (Days)	81	95	67	Current Liabilities / ((Operating Expenses - Depreciation Expense) / 365)

	Profitability Ratios
	Operating Margin	0.116	0.058	0.037	Operating Income / Total Operating Revenues
	Non-operating Revenue	0.018	0.105	0.087	Non-operating Revenues and Other Income / Total Operating Revenues
	Return on Total Assets	0.142	0.137	0.040	Excess of Revenues over Expenses / Total Assets
	Return on Net Assets	0.440	0.504	0.095	Excess of Revenues over Expenses / Net Assets

	Activity Ratios
	Total Asset Turnover Ratio	1.07	0.84	0.81	Total Revenues / Total Assets
	Fixed Asset Turnover Ratio	1.96	1.46	3.62	Total Revenues / Net Plant and Equipment
	Age of Plant	13.00	11.00	9.74	Accumulated Depreciation / Depreciation Expense

	Capital Structure Ratios
	Long-Term Debt to Net Assets	1.47	1.95	0.64	Long-Term Debt / Net Assets
	Net Assets to Total Assets	0.32	0.27	0.52	Net Assets / Total Assets
	Times Interest Earned	4.00	4.10	4.31	(Excess of Revenues over Expenses + Interest Expense) / Interest Expense
	Debt Service Coverage Ratio[1]	3.00	3.07	5.59	(Excess of Revenues over Expenses + Interest Expense + Depreciation Expense) /
					(Interest Expense + Principal Payments)
	[1] Annual principal payments are $500,000/year.

	Williamson's liquidity looks good: its ability to pay current debt has remained fairly constant and near the norm, but it is
	collecting and paying off debts faster than before. Except for non-operating revenue, which represents only a small
	portion of total revenues, the institution is quite profitable and is getting a healthy return on investments.

	One problem lies in the area of fixed assets: they are not being used as effectively as they could, and they are
	getting old. Unfortunately, Williamson is already more highly leveraged than are its peers, which suggests potential
	difficulties trying to borrow sufficient additional funds to replace aging equipment.

Template

Template Newport's Ratios for 20X0 and 20X1

	Year	Current Ratio	=	Current Assets	/	Current Liabilities
	20X1	0.00	=	$0	/	$0
	20X0	0.00	=	$0	/	$0
	Standard = 2.18

				(Cash +		Net Accounts		Current
	Year	Quick Ratio	=	Marketable Securities	+	Receivable)	/	Liabilities
	20X1	0.00	=	$0	+	$0	/	$0
	20X0	0.00	=	$0	+	$0	/	$0
	Standard = 1.76

		Acid Test		(Cash +		Current
	Year	Ratio	=	Marketable Securities	/	Liabilities
	20X1	0.00	=	$0	/	$0
	20X0	0.00	=	$0	/	$0
	Standard = 0.35

Exhibit 4-19a Statement of Operations for Wynn Memorial Nursing Home

20092008

Revenues:

Net Patient Service Revenue$1,400$1,200

Other Revenue200200

Total Revenues1,6001,400

Expenses:

Nursing Services1,3201,150

Administrative Services 110100

Depreciation2015

General Services5035

Total Expenses1,5001,300

Operating Income100100

Excess of Revenues over Expenses100100

Wynn Memorial Nursing Home

Statement of Operations (in 000)

For the Years Ended December 31, 2009 and 2008

Ex 4-1

Exhibit 4– 1 Statement of Operations and Balance Sheet for Newport Hospital

	Newport Hospital				Newport Hospital
	Statement of Operations				Balance Sheet
	For Years Ended December 31, 20X1 and 20X0				For Years Ended December 31, 20X1 and 20X0
		12/31/20X1	12/31/20X0			12/31/20X1	12/31/20X0
	Operating Revenues				ASSETS			% of Total	% Change
	Net Patient Revenues	$10,778,272	$10,566,176	Percent *	Current Assets			Assets	20x0-20x1
	Other Operating Revenues	233,749	253,517		Cash & Marketable Securities	$363,181	$158,458
	Total Operating Revenues	11,012,021	10,819,693	97.7%	Patient Accounts Receivables
				2.3%	Net of Uncollectible Accounts	1,541,244	1,400,013	1.4%	129.2%
	Operating Expenses:				Inventories	346,176	316,875
	Salaries and Benefits	5,644,880	5,345,498	100.0%	Prepaid Expenses	163,734	78,788	12.4%	10.1%
	Supplies	1,660,000	1,529,680		Other Current Assets	100,000	0	2.8%	9.2%
	Insurance	1,536,357	1,551,579		Total Current Assets	2,514,335	1,954,134	0.7%	107.8%
	Depreciation	383,493	420,238					0.0%	N/A
	Interest	500,000	276,379		Non-Current Assets			17.3%	28.7%
	Bad debt	456,289	365,678	49.4%	Gross Plant, Property, & Equipment	7,088,495	6,893,370
	Other	500,093	276,455	14.1%	(less Accumulated Depreciation)	(2,781,741)	(2,398,248)
	Total Operating Expenses	10,681,112	9,765,507		Net Plant, Property, and Equipment	4,306,754	4,495,122	60.9%	2.8%
				3.9%				-21.2%	16.0%
	Operating Income	330,909	1,054,186	2.6%	Long-Term Investments	3,414,732	4,525,476	39.7%	-4.2%
	Non-Operating Revenue	185,000	165,000	3.4%	Other Assets	640,915	340,853
	Excess of Revenues Over Expenses	515,909	1,219,186	0.0%	Total Non-Current Assets	8,362,401	9,361,451	40.0%	-24.5%
				2.6%				N/A	N/A
	Increase (Decrease) in			90.3%	Total Assets	$10,876,736	$11,315,585
	Unrestricted Net Assets	$515,909	$1,219,186					3.0%	88.0%
					LIABILITIES AND NET ASSETS
				9.7%	Current Liabilities
					Accounts Payable	$387,646	$166,600			0
				11.3%	Salaries Payable	135,512	529,298	100.0%	-3.9%
					Notes Payable	500,000	2,359,524
					Current Portion of Long-Term Debt	372,032	338,996
					Total Current Liabilities	1,395,190	3,394,418
								1.5%	132.7%
					Long-Term Liabilities			4.7%	-74.4%
					Bonds Payable	6,938,891	6,009,484	20.9%	-78.8%
					Total Long-Term Liabilities	6,938,891	6,009,484	3.0%	9.7%
								30.0%	-58.9%
					Total Liabilities	8,334,081	9,403,902

					Net Assets			53.1%	15.5%
					Unrestricted	1,901,739	1,570,830
					Temporary Restricted	328,000	40,853	53.1%	15.5%
					Permanently Restricted	312,916	300,000
					Total Net Assets	2,542,655	1,911,683	83.1%	-11.4%

					Total Liabilities and Net Assets	$10,876,736	$11,315,585
								13.9%	21.1%

Ex 4-2

Exhibit 4-2 Horizontal Analysis of the Statement of Operations
and Balance Sheet for Newport Hospital

	Newport Hospital
	Statement of Operations
	For the Years Ended December 31, 20X1 and 20X0
				% Change
		12/31/20X1	12/31/20X0	20X1-20X0
	Operating Revenues:
	Net Patient Revenues	$10,778,272	$10,566,176	2.0%
	Other Operating Revenues	233,749	253,517	-7.8%
	Total Operating Revenues	11,012,021	10,819,693	1.8%

	Operating Expenses:
	Total Operating Expenses	10,681,112	9,765,507	9.4%

	Operating Income	330,909	1,054,186	-68.6%
	Non-Operating Revenue	185,000	165,000	12.1%
	Excess of Revenues Over Expenses	515,909	1,219,186	-57.7%

	Increase (Decrease) in	$515,909	$1,219,186	-57.7%
	Unrestricted Net Assets


	Newport Hospital
	Balance Sheet
	December 31, 20X1 and 20X0
				% Change
		20X1	20X0	20X1-20X0
	ASSETS
	Total Current Assets	$2,514,335	$1,954,134	28.7%
	Total Non-Current Assets	8,362,401	9,361,451	-10.7%
	Total Assets	$10,876,736	$11,315,585	-3.9%

	LIABILITIES AND NET ASSETS
	Total Current Liabilities	$1,395,190	$3,394,418	-58.9%
	Total Long-Term Liabilities	6,938,891	6,009,484	15.5%
	Total Net Assets	2,542,655	1,911,683	33.0%
	Total Liabilities and Net Assets	$10,876,736	$11,315,585	-3.9%

Ex 4-3

Exhibit 4-3 Vertical (Common-Size) Analysis for the Statement of Operations and Balance Sheet for Newport Hospital

	Newport Hospital
	Statement of Operations
	For Years Ended December 31, 20X1 and 20X0
			% of Total		% of Total
		12/3120X1	Revenues	12/3120X0	Revenues
	Operating Revenues
	Net Patient Revenues	$10,778,272	97.9%	$10,566,176	97.7%
	Other Operating Revenues	233,749	2.1%	253,517	2.3%
	Total Operating Revenues	11,012,021	100.0%	10,819,693	100.0%

	Operating Expenses:
	Total Operating Expenses	10,681,112	97.0%	9,765,507	90.3%

	Operating Income	330,909	3.0%	1,054,186	9.7%
	Non-operating revenue	185,000	1.7%	165,000	1.5%
	Excess of Revenues over Expenses	515,909	4.7%	1,219,186	11.3%

	Increase (Decrease) in Unrestricted Net Assets	$515,909	4.7%	$1,219,186	11.3%


	Newport Hospital
	Balance Sheet
	For Years Ended December 31, 20X1 and 20X0
			% of Total		% of Total
		20X1	Assets	20X0	Assets
	Assets
	Total Current Assets	$2,514,335	23.1%	$1,954,134	17.3%
	Total Non-Current Assets	8,362,401	76.9%	9,361,451	82.7%
	Total Assets	$10,876,736	100.0%	$11,315,585	100.0%

	Liabilities and Net Assets
	Total Current Liabilities	$1,395,190	12.8%	$3,394,418	30.0%
	Total Long-Term Liabilities	6,938,891	63.8%	6,009,484	53.1%
	Total Net Assets	2,542,655	23.4%	1,911,683	16.9%

	Total Liabilities and Net Assets	$10,876,736	100.0%	$11,315,585	100.0%

Ex 4-4

Exhibit 4-4 Common-Size Financial Statements for a Small and a Large Hospital

	Small Community Hospital Balance Sheet			Small Community Hospital Statement of Operations
	December 31, 20X0			December 31, 20X0
			% Total			% Total
			Assets			Revenues
	Current Assets	$1,000	10%	Net Patient Revenues	$10,000	83%
	Net Plant and Equipment	9,000	88%	Investment Income	2,000	17%
	Other Assets	200	2%	Total Revenues	12,000	100%
	Total Assets	$10,200	100%
				Operating Expenses	10,000	83%
	Current Liabilities	$900	9%	Income from Operations	2,000	17%
	Long-Term Debt	5,000	49%
	Total Liabilities	5,900	58%	Excess of Revenues Over Expenses	2,000	17%

	Net Assets	4,300	42%	Increase in Net Assets	$2,000	17%
	Total Liabilities and Net Assets	$10,200	100%

	Large Community Hospital Balance Sheet			Large Community Hospital Statement of Operations
	December 31, 20X0			December 31, 20X0
			% Total			% Total
			Assets			Revenues
	Current Assets	$15,000	22%	Net Patient Revenues	$68,000	97%
	Net Plant and Equipment	50,000	75%	Investment Income	2,000	3%
	Other Assets	2,000	3%	Total Revenues	70,000	100%
	Total Assets	$67,000	100%
				Operating Expenses	65,000	93%
	Current Liabilities	$12,000	18%	Income from Operations	5,000	7%
	Long-Term Debt	35,000	52%
	Total Liabilities	47,000	70%	Excess of Revenues Over Expenses	5,000	7%

	Net Assets	20,000	30%	Increase in Net Assets	$5,000	7%
	Total Liabilities and Net Assets	$67,000	100%

	Note: All figures expressed in '000.

Ex 4-5a

Exhibit 4-5a Newport Hospital Ratios for 20X0 and 20X1, and HCIA & HCFA Median Ratio Values

		Standard
		Small Hospitals'				Current
		HCIA & HCFA	Desired	Trend Analysis		Year	Trend	Possible Explanation
	Ratios	Median Ratio[1]	Position	20X1	20X0	Position	Position	Current Year Relative to Standards
	Liquidity Ratios
	Current Ratio	2.18	Above	1.80	0.58	Below	Increasing	Lower cash & mkt securities & higher receivables
	Quick Ratio[2]	1.76	Above	1.36	0.46	Below	Increasing	Lower cash & mkt securities & higher receivables
	Acid Test Ratio	0.35	Above	0.26	0.05	Below	Increasing	Lower cash & mkt securities
	Days in Accounts Receivable	67	Below	52	48	Below	Increasing	Slower collection of receivables
	Days Cash on Hand[2]	46	Above	13	6	Below	Increasing	Less cash & mkt securities
	Average Payment Period	54	Below	49	133	Below	Decreasing	Faster payment of payables

	Profitability Ratios
	Operating Margin	0.02	Above	0.03	0.10	Above	Decreasing	Expenses growing at higher rate than revenues
	Non-Operating Revenue[2]	0.05	Varies	0.02	0.02	Below	Increasing	No change in non-operating income
	Return on Total Assets	0.03	Above	0.05	0.11	Above	Decreasing	Declining profits from higher expenses
	Return on Equity Net Assets[2]	0.06	Above	0.20	0.64	Above	Decreasing	Declining profits from higher expenses

	Activity Ratios
	Total Asset Turnover Ratio	1.02	Above	1.01	0.96	Below	Increasing	Total Assets generating less revenues
	Net Fixed Assets Turnover Ratio	3.59	Above	2.56	2.41	Below	Increasing	Fixed Assets generating less revenues
	Age of Plant Ratio	9.86	Below	7.25	5.71	Below	Increasing	Newer plant and equipment

	Capital Structure Ratios
	Long-Term Debt to Net Assets Ratio	0.21	Below	2.73	3.14	Above	Decreasing	Higher long-term debt relative to equity
	Net Assets to Total Assets Ratio[2]	0.62	Above	0.23	0.17	Below	Increasing	Lower equity relative to total assets
	Times Interest Earned Ratio[2]	2.85	Above	2.03	5.41	Below	Decreasing	Lower profits from higher expenses
	Debt Service Coverage Ratio	3.35	Above	2.00	4.02	Below	Decreasing	Lower profits from higher expenses

	[1] Since Newport Hospital was less than 100 beds, HCIA -Sachs' Standard ratio values for Beds less than 100 were used.
	[2] These Standard ratios values were obtained from Health Care Financing Administration
	Hospital Cost Report Information System Files for financial statements ending in 1998.

	Based upon HCIA-Sachs 1998 Median values, which approximate hospital medians in mid-1990s.

Ex 4-6

Exhibit 4-6 Selected Liquidity Ratios
					Desired
	Ratio	Formula		Standard1	Position

	Current Ratio		Current Assets	2.18	Above
			Current Liabilities

	Quick Ratio	Cash + Marketable Securities + Net Receivables		1.76	Above
		Current Liabilities

	Acid Test Ratio		Cash + Marketable Securities	0.35	Above
			Current Liabilities

	Days in Accounts Receivable		Net Patient Accounts Receivable	67	Below
			Net Patient Revenues / 365

	Days Cash on Hand	Cash + Marketable Securities		46	Above
		(Operating Expenses – Depreciation Expense) / 365

	Average Payment Period (Days)	Current Liabilities			Organizationally
		(Operating Expenses – Depreciation Expense) / 365		54	Dependent

	1 Based upon HCIA-Sachs’ 1998 approximate hospital median values in mid-1990s

Standard1

Ex 4-6a

Exhibit 4-6a Newport's Current Ratio for 20X0 and 20X1

	Year	Current Ratio	=	Current Assets	/	Current Liabilities

	20X1	1.80	=	$2,514,335	/	$1,395,190
	20X0	0.58	=	$1,954,134	/	$3,394,418

	Standard = 2.18

Ex 4-6b

Exhibit 4- 6b Newport's Quick Ratio for 20X0 and 20X1

				(Cash +		Net Accounts		Current
	Year	Quick Ratio	=	Marketable Securities	+	Receivable)	/	Liabilities

	20X1	1.36	=	$363,181	+	$1,541,244	/	$1,395,190
	20X0	0.46	=	$158,458	+	$1,400,013	/	$3,394,418

	Standard = 1.76

Ex 4-6c

Exhibit 4– 6c Newport’s Acid Test Ratio for 20X0 and 20X1

		Acid Test		(Cash +		Current
	Year	Ratio	=	Marketable Securities	/	Liabilities

	20X1	0.26	=	$363,181	/	$1,395,190
	20X0	0.05	=	$158,458	/	$3,394,418

	Standard = 0.35

Ex 4-6d

Exhibit 4-6d Newport's Days in Accounts Receivable Ratio of 20X0 and 20X1

	Steps 1,2
		Avg. Net Patient			Net Patient
	Year	Revenues Per/Day		=	Revenues	/	365 days

	20X1	$29,530	/day	=	$10,778,272	/	365	days
	20X0	$28,948	/day	=	$10,566,176	/	365	days


	Steps 3,4
		Days in			Net Patient		Avg. Net Patient
	Year	Accounts Receivable		=	Accounts Receivable	/	Revenues Per/Day

	20X1	52	days	=	$1,541,244	/	$29,530	/day
	20X0	48	days	=	$1,400,013	/	$28,948	/day

	Standard = 67 days

Ex 4-6e

Exhibit 4-6e Newport’s Days Cash on Hand Ratio for 20X0 and 20X1

		Operating					Depreciation
	Year	Expense per Day		=	(Operating Expenses	-	Expense)	/	365 days

	20X1	$28,213	/day	=	$10,681,112	-	$383,493	/	365	days
	20X0	$25,603	/day	=	$9,765,507	-	$420,238	/	365	days


		Days Cash			Cash +		Operating
	Year	On Hand		=	Marketable Securities	/	Expense per Day

	20X1	13	days	=	$363,181	/	$28,213	/day
	20X0	6	days	=	$158,458	/	$25,603	/day

	Standard = 46 days

Ex 4-6f

Exhibit 4-6f Newport’s Average Payment Period Ratio for 20X0 and 20X1

	Steps 1, 2
		Average Cash			(Total		Depreciation
	Year	Expense per Day		=	Expenses	-	Expense)	/	365 days

	20X1	$28,213	/day	=	$10,681,112	-	$383,493	/	365	days
	20X0	$25,603	/day	=	$9,765,507	-	$420,238	/	365	days


	Steps 3, 4
		Avg. Payment			Current		Average Cash
	Year	Period		=	Liabilities	/	Expense per Day

	20X1	49	days	=	$1,395,190	/	$28,213	/day
	20X0	133	days	=	$3,394,418	/	$25,603	/day

	Standard = 54 days

Ex 4-7Data

Exhibit 4-7 Newport Hospital’s Current, Quick, and Acid Test Ratios in 20X0 and 20X1 as Compared to the Standard

		20X0	20X1	Standard
	Current Ratio	0.58	1.80	2.18
	Quick Ratio	0.46	1.36	1.76
	Acid Test Ratio	0.05	0.26	0.35

Desired position is below the standard for the days in accounts receivable ratio and above the standard for the days cash on hand ratio. The desired position relative to the standard for the average payment period ratio is organizationally dependent.

Page &P

Ex 4-7Data

1	2	2
0	1	2
0	0	0

Page &P

19X0

19X1

Standard

Ex 4-7Ch

1	2	2
0	1	2
0	0	0

20X0

20X1

Standard

Ex 4-7

Exhibit 4-7 Newport Hospital’s Current, Quick, and Acid Test Ratios in 20X0 and 20X1 as Compared to the Standard

Ex 4-7

1	2	2
0	1	2
0	0	0

20X0

20X1

Standard

Ex 4-8Data

Exhibit 4– 8 Newport Hospital’s Days in Accounts Receivable, Days Cash on Hand, and
Average Payment Period Ratios for 20X0 and 20X1 as Compared to the Standard

		20X0	20X1	Standard
	Days in A/R	48	52	67
	Days Cash on Hand	6	13	46
	Avg. Payment Period	133	49	54

Ex 4-8Data

1	2	2
0	1	2
0	0	0

Page &P

19X0

19X1

Standard

Ex 4-8Ch

48	52	67
6	13	46
133	49	54

Page &P

Days in A/R

Avg. Payment Period

19X0

19X1

Standard

#REF! #REF!

133

20X0

20X1

Standard

Ex 4-8

Exhibit 4– 8 Newport Hospital’s Days in Accounts Receivable, Days Cash on Hand, and

Average Payment Period Ratios for 20X0 and 20X1 as Compared to the Standard

Ex 4-8

48	52	67
6	13	46
133	49	54

20X0

20X1

Standard

Ex 4-9

Exhibit 4-9 Selected Profitability Ratios
					Desired
	Ratio	Formula		Standard1	Position

	Operating Margin		Operating Income	0.02	Above
			Total Operating Revenues

	Nonoperating Revenue Ratio		Nonoperating Revenues	0.05	Organizationally
			Total Operating Revenues		Dependent

	Return on Total Assets2	Excess of Revenues over Expenses		0.03	Above
			Total Assets

	Return on Net Assets3	Excess of Revenues over Expenses		0.06	Above
			Net Assets

	1 Based upon HCIA-Sachs’ 1998 approximate hospital median values in mid-1990s
	2 Called return on assets and calculated as net income/total assets in for-profit health care organizations
	3 Called return on equity in for-profit health care organizations (net income/owners’ equity)

Ex 4-9a

Exhibit 4-9a Newport’s Operating Margin Ratio for 20X0 and 20X1

		Operating		Operating		Total Operating
	Year	Margin	=	Income	/	Revenues

	20X1	0.03	=	$330,909	/	$11,012,021
	20X0	0.10	=	$1,054,186	/	$10,819,693

	Standard = 0.02

Ex 4-9b

Exhibit 4-9b Newport’s Non-Operating Revenue Ratio for 20X0 and 20X1

		Non-Operating		Non-Operating		Total Operating
	Year	Revenue Ratio	=	Revenues	/	Revenues

	20X1	0.02	=	$185,000	/	$11,012,021
	20X0	0.02	=	$165,000	/	$10,819,693

	Standard = 0.05

Ex 4-9c

Exhibit 4-9c Newport’s Return on Total Assets Ratio for 20X0 and 20X1

		Return on		Excess of Revenues
	Year	Total Assets	=	over Expenses	/	Total Assets

	20X1	0.05	=	$515,909	/	$10,876,736
	20X0	0.11	=	$1,219,186	/	$11,315,585

	Standard = 0.03

Ex 4-9d

Exhibit 4-9d Newport’s Return on Net Assets Ratio for 20X0 and 20X1

		Return on		Excess of Revenues
	Year	Net Assets	=	over Expenses	/	Net Assets

	20X1	0.20	=	$515,909	/	$2,542,655
	20X0	0.64	=	$1,219,186	/	$1,911,683

	Standard = 0.06

Ex 4-10

Exhibit 4-10

	In Case 1, the organization has no debt. In Case 2, the organization has 50 percent of its assets financed by debt.
	In both cases, the organization makes a $100,000 profit, but the return on net assets is twice as high in Case 2.

	Case 1: $100,000 Excess of Revenues over Expenses; no debt

	Balance Sheet				Statement of Operations
	Assets	$1,000,000	Debt	$0	Excess of Revenues over Expenses	$100,000
			Net Assets	$1,000,000

	Return on Net Assets = $100,000 / $1,000,000 = 0.10

	Case 2: $100,000 Excess of Revenues over Expenses; 50% debt

	Balance Sheet				Statement of Operations
	Assets	$1,000,000	Debt	$500,000	Excess of Revenues over Expenses	$100,000
			Net Assets	$500,000

	Return on Net Assets = $100,000 / $500,000 = 0.20

	In Case 3, the organization has no debt. In Case 4, the organization has 50 percent of its assets financed by debt.
	In both cases, the organization incurs a $100,000 loss, but the negative return on net assets is twice as much in Case 4.

	Case 3: ($100,000) Excess of Revenues over Expenses; no debt

	Balance Sheet				Statement of Operations
	Assets	$1,000,000	Debt	$0	Excess of Revenues over Expenses	($100,000)
			Net Assets	$1,000,000

	Return on Net Assets = -$100,000 / $1,000,000 = -0.10

	Case 4: ($100,000) Excess of Revenues over Expenses; 50% debt

	Balance Sheet				Statement of Operations
	Assets	$1,000,000	Debt	$500,000	Excess of Revenues over Expenses	($100,000)
			Net Assets	$500,000

	Return on Net Assets = -$100,000 / $500,000 = -0.20

	Point: Increased debt magnifies both gains and losses when computing Return on Net Assets.

Ex 4-11Data

Exhibit 4-11 Newport Hospital’s Profitability Ratios for 20X0 and 20X1 as Compared to the Standard

		20X0	20X1	Standard
	Operating Margin	0.10	0.03	0.02
	Non-Operating Revenue	0.02	0.02	0.05
	Return on Total Assets	0.11	0.05	0.03
	Return on Net Assets	0.64	0.20	0.06

Page &P

Ex 4-11Ch

0	0	0
0	0	0
0	0	0
1	0	0

20X0

20X1

Standard

Ex 4-11

Exhibit 4-11 Newport Hospital’s Profitability Ratios for 20X0 and 20X1 as Compared to the Standard

Ex 4-11

0	0	0
0	0	0
0	0	0
1	0	0

20X0

20X1

Standard

Ex 4-12

Exhibit 4-12 Selected Activity Ratios

	Ratio	Formula		Standard1	Desired Position

	Total Asset Turnover Ratio		Total Revenues2	1.02	Above
			Total Assets

	Fixed Asset Turnover Ratio	Total Revenues2		3.59	Above
		Net Plant and Equipment

	Age of Plant Ratio	Accumulated Depreciation		9.86	Below
		Depreciation Expense

	1 Based upon HCIA-Sachs’ 1998 median values
	2 Operating Revenues are often used in place of Total Revenues

Ex 4-12a

Exhibit 4-12a Newport’s Total Asset Turnover Ratio for 20X0 and 20X1

		Total Asset		Total		Total
	Year	Turnover	=	Revenues	/	Assets

	20X1	1.01	=	$11,012,021	/	$10,876,736
	20X0	0.96	=	$10,819,693	/	$11,315,585

	Standard = 1.02

Ex 4-12b

Exhibit 4-12b Newport’s Fixed Asset Turnover Ratio for 20X0 and 20X1

		Fixed Asset		Total		Net Plant and
	Year	Turnover	=	Revenues	/	Equipment

	20X1	2.56	=	$11,012,021	/	$4,306,754
	20X0	2.41	=	$10,819,693	/	$4,495,122

	Standard = 3.59

Ex 4-12c

Exhibit 4-12c Newport’s Age of Plant Ratio for 20X0 and 20X1

		Age of		Accumulated		Depreciation
	Year	Plant	=	Depreciation	/	Expense

	20X1	7.25	=	$2,781,741	/	$383,493
	20X0	5.71	=	$2,398,248	/	$420,238

	Standard = 9.86

Ex 4-13Data

Exhibit 4-13 Newport Hospital’s Activity Ratios for 20X0 and 20X1 as Compared to the Standard

		20X0	20X1	Standard
	Total Asset Turnover	0.96	1.01	1.02
	Fixed Asset Turnover	2.41	2.56	3.59
	Average Age of Plant	5.71	7.25	9.86

Page &P

Ex 4-13Ch

1	1	1
2	3	4
6	7	10

20X0

20X1

Standard

Ex 4-13

Exhibit 4-13 Newport Hospital’s Activity Ratios for 20X0 and 20X1 as Compared to the Standard

Ex 4-13

1	1	1
2	3	4
6	7	10

20X0

20X1

Standard

Ex 4-14

Exhibit 4-15 Selected Capital Structure Ratios

	Ratio	Formula		Standard

	Long-Term Debt to Net Assets Ratio		Long-Term Debt	0.21
			Net Assets

	Net Assets to Total Assets Ratio		Net Assets	0.62
			Total Assets

		(Excess of Revenues over Expenses
	Times Interest Earned Ratio	+ Interest Expense)		2.85
		Interest Expense

		(Excess of Revenues over Expenses
	Debt Service Coverage Ratio	+ Interest Expense + Depreciation Expense)		3.35
		(Interest Expense + Principal Payments)

Ex 4-14a

Exhibit 4-14a Newport's Long-Term Debt to Net Assets Ratio for 20X0 and 20X1

		Long-Term Debt
	Year	to Net Assets	=	Long-Term Debt	/	Net Assets

	20X1	2.73	=	$6,938,891	/	$2,542,655
	20X0	3.14	=	$6,009,484	/	$1,911,683

	Standard = 0.21

Ex 4-14b

Exhibit 4-14 b Newport's Net Assets to Total Assets Ratio for 20X0 and 20X1

		Net Assets to
	Year	Total Assets	=	Net Assets	/	Total Assets

	20X1	0.23	=	$2,542,655	/	$10,876,736
	20X0	0.17	=	$1,911,683	/	$11,315,585

	Standard = 0.62

Ex 4-14c

Exhibit 4-14c Newport's Times Interest Earned Ratio for 20X0 and 20X1

		Times Interest		(Excess of Revenues
	Year	Earned	=	over Expenses	+	Interest Expense)	/	Interest Expense

	20X1	2.03	= (	$515,909	+	$500,000	) /	$500,000
	20X0	5.41	= (	$1,219,186	+	$276,379	) /	$276,379

	Standard = 2.85

Ex 4-14d

Exhibit 4-14d Newport's Debt Service Coverage Ratio for 20X0 and 20X1

	Steps 1-4
		Cash Flow		(Excess of Revenues		Interest		Depreciation
	Year	Before Interest	=	over Expenses	+	Expense	+	Expense)

	20X1	$1,399,402	= (	$515,909	+	$500,000	+	$383,493	)
	20X0	$1,915,803	= (	$1,219,186	+	$276,379	+	$420,238	)

	Step 5
		Debt Service		Cash Flow		(Interest		Principal
	Year	Coverage	=	Before Interest	/	Expense	+	Payments)

	20X1	2.00	=	$1,399,402	/ (	$500,000	+	$200,000	)
	20X0	4.02	=	$1,915,803	/ (	$276,379	+	$200,000	)

	Standard = 3.35

Ex 4-15Data

Exhibit 4-15 Newport Hospital’s Capital Structure Ratios for 20X0 and 20X1 as Compared to the Standard

		20X0	20X1	Standard
	Long-Term Debt to Net Assets	3.14	2.73	0.21
	Net Assets to Total Assets	0.17	0.23	0.62
	Times Interest Earned	5.41	2.03	2.85
	Debt Service Coverage	4.02	2.00	3.35

	Desired position is below standard for the long-term debt to equity ratio, organizationally dependent for the net asset to total asset ratio, and above standard for the last two ratios.

Page &P

Ex 4-15Data

0	0	0
0	0	0
0	0	0
0	0	0

Page &P

20X0

20X1

Standard

Ex 4-15Ch

3	3	0
0	0	1
5	2	3
4	2	3

20X0

20X1

Standard

Ex 4-15

Exhibit 4-15 Newport Hospital’s Capital Structure Ratios for 20X0 and 20X1 as Compared to the Standard

Ex 4-15

3	3	0
0	0	1
5	2	3
4	2	3

20X0

20X1

Standard

Ex 4-16a

Exhibit 4-16a Financial Ratios for All U.S. Hospitals by Bed Size

		HCIA & HCFA	HCIA & HCFA	HCIA & HCFA	HCIA & HCFA	HCIA & HCFA
		Median Ratio[1]	Median Ratio[1]	Median Ratio[1]	Median Ratio[1]	Median Ratio[1]	Desired
	Ratio	Hospital Industry	1-99 beds	100-249 bed	250-399 beds	400 and over	Position[2]
	Liquidity Ratios
	Current Ratio	2.06	2.18	1.95	1.94	1.84	Above
	Quick Ratio	1.69	1.76	1.57	1.54	1.48	Above
	Acid Test Ratio	0.26	0.35	0.31	0.31	0.11	Above
	Days in Accounts Receivable	66	67	65	64	68	Below
	Days Cash on Hand	47	46	43	44	45	Above
	Average Payment Period (Days)	58	54	66	69	67	Below
	Profitability Ratios
	Operating Margin	0.03	0.02	0.02	0.03	0.04	Above
	Non-Operating Revenue	0.05	0.05	0.04	0.06	0.09	Varies
	Return on Total Assets	0.04	0.03	0.04	0.05	0.04	Above
	Return on Net Assets	0.08	0.06	0.09	0.10	0.10	Above
	Activity Ratios
	Total Asset Turnover Ratio	0.93	1.02	0.85	0.79	0.81	Above
	Net Fixed Assets Turnover Ratio	3.50	3.59	3.45	3.44	3.62	Above
	Age of Plant Ratio	9.53	9.86	10.01	9.93	9.74	Below
	Capital Structure Ratios
	Long-Term Debt to Net Assets Ratio	0.38	0.21	0.48	0.56	0.64	Below
	Net Assets to Total Assets Ratio	0.60	0.62	0.56	0.55	0.52	Above
	Times Interest Earned Ratio	4.29	2.85	4.30	5.39	4.31	Above
	Debt Service Coverage Ratio	4.06	3.35	3.73	4.61	5.59	Above

	[1] These Standard ratios values were obtained from Health Care Financing Administration
	Hospital Cost Report Information System Files for financial statements ending in 1998.
	[2] These are true to a certain point. For example, for the acid test ratio, in general, the higher the better,
	but after a certain point, the organization might be better off investing some of the excess cash.

Ex 4-16b

Exhibit 4-16b Definition of Financial Ratios

	Liquidity Ratios	Formula
	Current Ratio	Current Assets / Current Liabilities
	Quick Ratio	(Cash + Marketable Securities + Net Receivables) / Current Liabilities
	Acid Test Ratio	(Cash + Marketable Securities) / Current Liabilities
	Days in Accounts Receivable	Net Patient Accounts Receivables / (Net Patient Revenues / 365)
	Days Cash on Hand	(Cash + Marketable Securities) / ((Operating Expenses - Depreciation Expense) / 365)
	Average Payment Period (Days)	Current Liabilities / ((Operating Expenses - Depreciation Expense) / 365)

	Profitability Ratios	Formula
	Operating Margin	Operating Income / Total Operating Revenues
	Non-operating Revenue Ratio	Non-operating Revenues and Other Income / Total Operating Revenues
	Return on Total Assets[1]	Excess of Revenues over Expenses / Total Assets
	Return on Net Assets[2]	Excess of Revenues over Expenses / Net Assets

	Activity Ratios	Formula
	Total Asset Turnover Ratio	Total Revenues / Total Assets
	Net Fixed Assets Turnover Ratio	Total Revenues / Net Plant and Equipment
	Age of Plant Ratio	Accumulated Depreciation / Depreciation Expense

	Capital Structure Ratios	Formula
	Long-Term Debt to Net Assets Ratio[3]	Long-Term Debt / Net Assets
	Net Assets to Total Assets Ratio[4]	Net Assets / Total Assets
	Times Interest Earned Ratio[5]	(Excess of Revenues over Expenses + Interest Expense) / Interest Expense
	Debt Service Coverage Ratio[6]	(Excess of Revenues over Expenses + Interest Expense + Depreciation Expense) /
		(Interest Expense + Principal Payments)

	[1] In for-profit health care organizations, caluclated as: Net Income / Total Assets
	[2] Called the Return on Equity in for-profit health care organizations, and calculated as: Net Income / Owners' Equity
	[3] Called Long-Term Debt to Equity in for-profit health care organizations, and calculated as: Long-Term Debt / Owners' Equity
	[4] Called Equity to Total Assets in for-profit health care organizations, and calculated as: Owners' Equity / Total Assets
	[5] In for-profit health care organizations, calculated as: Net Income + Interest Expense) / Interest Expense
	[6] In for-profit health care organizations, calculated as:
	(Net Income + Interest Expense + Depreciation Expense) / (Interst Expense + Principal Payments)

Ex 4-17

Exhibit 4-17 Selected Ratios for Glen Hall Hospital and the Industry Standards

		Industry	Glen Hall
	Profitibility Ratios	Standard	Hospital

	Operating Margin	0.041	(0.031)

	Return on Total Assets	0.075	0.024

	Non-Operating Ratio	0.040	0.104

Exhib 4-18x

Exhibit 4-18 Selected Ratios for and the Industry Standards

		Industry
	Profitibility Ratios	Standard

	Operating Margin

	Return on Total Assets

	Non-Operating Ratio

IM-P1-SOO

Exhibit 4-19a Statement of Operations for Wynn Memorial Nursing Home

	Wynn Memorial Nursing Home
	Statement of Operations (in 000)
	For the Years Ended December 31, 2009 and 2008

		2009	2008
	Revenues:
	Net Patient Service Revenue	$1,400	$1,200
	Other Revenue	200	200
	Total Revenues	1,600	1,400


	Expenses:
	Nursing Services	1,320	1,150
	Administrative Services	110	100
	Depreciation	20	15
	General Services	50	35
	Total Expenses	1,500	1,300

	Operating Income	100	100
	Excess of Revenues over Expenses	100	100

	Increase in Net Assets	$100	$100

IM-P1-BS

Exhibit 4-19b Balance Sheet for Wynn Memorial Nursing Home

	Wynn Memorial Nursing Home
	Balance Sheet (in 000)
	For the Years Ending December 31, 2008 and 2007

		2008	2007
	Current Assets:
	Cash and Cash Equivalents	$30	$50
	Net Patient Receivables	295	235
	Prepaid Expenses	80	80
	Total Current Assets	405	365

	Plant, Property, & Equipment
	Gross Plant, Property, & Equipment	350	300
	(less Accumulated Depreciation)	(70)	(50)
	Net Plant, Property, & Equipment	280	250

	Construction in Progress	203	0

	Total Assets	$888	$615

	Current Liabilities:
	Accounts Payable	$220	$190
	Salaries Payable	75	50
	Total Current Liabilities	295	240

	Long-Term Liabilities:
	Bonds Payable	100	20
	Total Long-Term Liabilities	100	20

	Net Assets	493	355

	Total Liabilities and Net Assets	$888	$615

Ex 4-20a

Exhibit 4-20a Statement of Operations for Maryville Community Hospital

	Maryville Community Hospital
	Statement of Operations (in '000)
	For the Years Ended December 31, 20X1 and 20X0

		20X1	20X0
	Revenues:
	Net Patient Service Revenue	$17,500	$18,000
	Net Assets Released from Restriction	2,000	100
	Other Revenue	500	450
	Total Revenues	20,000	18,550

	Expenses:
	Nursing S\ervices	13,000	15,000
	Administrative Services	5,000	3,000
	Depreciation	1,000	1,000
	General Services	200	100
	Total Expenses	19,200	19,100

	Operating Income	800	(550)
	Excess of Revenues over Expenses	800	(550)
	Transfer to Parent	500	0

	Increase (Decrease) in Net Assets	$300	($550)

Ex 4-20b

Exhibit 4-20b Balance Sheet for Maryville Community Hospital

	Maryville Community Hospital
	Balance Sheet (in '000)
	For the Years Ended December 31, 20X1 and 20X0

		20X1	20X0
	Current Assets:
	Cash and Cash Equivalents	$750	$650
	Net Patient Receivables	2,500	3,800
	Inventory	700	800
	Total Current Assets	3,950	5,250

	Plant, Property, & Equipment
	Gross Plant, Property, & Equipment	20,000	19,000
	(less Accumulated Depreciation)	(6,000)	(5,000)
	Net Plant, Property, & Equipment	14,000	14,000

	Board-Designated Funds	7,000	4,500

	Total Assets	24,950	23,750

	Current Liabilities:
	Accounts Payable	1,500	1,800
	Accrued Expenses	500	750
	Total Current Liabilities	2,000	2,550

	Long-Term Liabilities:
	Bonds Payable	10,500	11,000
	Total Long-Term Liabilities	10,500	11,000

	Net Assets	12,450	10,200

	Total Liabilities and Net Assets	$24,950	$23,750

Ex 4-21

Exhibit 4-21 Selected Financial Ratios for Hollywood Community Hospital

	Ratio	20X1	20X0

	Current Ratio	4.05	2.30
	Acid Test Ratio	0.95	0.20
	Days in Accounts Receivable	75 days	65 days
	Days Cash on Hand	25 days	5 days
	Average Payment Period (Days)	55 days	55 days

	Fixed Asset Turnover Ratio	3.45	2.60
	Total Asset Turnover Ratio	1.15	1.05

	Operating Margin	-0.05	0.02
	Return on Net Assets	0.01	0.06

	Long-Term Debt to Net Assets (Equity)	2.95	1.18
	Net Assets to Total Assets	0.34	0.46

	Age of Plant	5.05	5.78

Ex 4-22

Exhibit 4-22 Financial Ratios for McGill Healthcare System

	Ratio	12/31/20X1	12/31/20X0

	Current Ratio	1.75	2.50
	Quick Ratio	1.01	1.85
	Acid Test Ratio	0.15	0.35
	Days in Accounts Receivable	55 days	65 days
	Average Payment Period	40 days	45 days
	Days Cash on Hand	12 days	35 days

	Fixed Asset Turnover Ratio	0.95	3.20
	Total Asset Turnover Ratio	0.65	1.10

	Operating Margin	0.03	0.02
	Non-Operating Revenue	0.25	0.10
	Return on Assets	0.06	0.04

	Long-Term Debt to Equity	0.22	0.25
	Equity to Total Assets	0.65	0.35
	Debt Service Coverage Ratio	5.55	4.55

	Age of Plant	4.50	10.01

Ex 4-23

Exhibit 4-23 Financial Ratios for Hope Community Hospital

	Ratio	20X1	20X0

	Liquidity Ratios
	Current Ratio	1.78	1.81
	Quick Ratio	1.29	1.39
	Acid Test Ratio	0.23	0.18
	Average Collection Period	82 days	118 days
	Days Cash on Hand	19 days	17 days
	Average Payment Period (Days)	81 days	95 days

	Profitability Ratios
	Return on Total Assets	0.14	0.14
	Return on Net Assets	0.44	0.50
	Operating Margin	0.12	0.06
	Nonoperating Revenue	0.02	0.11

	Activity Ratios
	Total Asset Turnover Ratio	1.07	0.84
	Fixed Asset Turnover Ratio	1.96	1.46
	Age of Plant	13.00	11.00

	Capital Structure Ratios
	Net Assets to Total Assets	0.32	0.27
	Long-Term Debt to Net Assets	1.47	1.95
	Debt Service Coverage Ratio	1.50	1.53
	Times Interest Earned	4.00	4.10

Ex 4-24

Exhibit 4-24 St. Jude Hospital's Financial Ratios

	Ratio	20X1	20X0

	Current Ratio	2.10	2.20
	Acid Test Ratio	0.10	0.25
	Days in Accounts Receivable	60 days	45 days
	Days Cash on Hand	5 days	15 days
	Average Payment Period (Days)	45 days	43 days

	Fixed Asset Turnover Ratio	2.54	3.58
	Total Asset Turnover Ratio	1.04	1.10

	Operating Margin	0.03	0.10
	Return on Assets	0.12	0.20

	Long-Term Debt to Equity	2.18	1.10
	Equity to Total Assets	0	1
	Debt Service Coverage Ratio	2.10	3.20

	Age of Plant	3.50	5.70

Ex 4-25

Exhibit 4-25 Financial Ratios for Swayze Community Hospital

	Ratio	20X1	20X0

	Current Ratio	2.25	1.95
	Quick Ratio	1.65	1.45
	Acid Test Ratio	0.10	0.25
	Days in Accounts Receivable	80	50
	Average Payment Period	65	75
	Days Cash on Hand	15	35

	Fixed Asset Turnover Ratio	3.50	3.20
	Total Asset Turnover Ratio	1.12	1.10

	Operating Margin	0.08	0.06
	Return on Assets	0.10	0.07

	Long-Term Debt to Net Assets	0.55	0.68
	Net Assets to Total Assets	0.45	0.35
	Debt Service Coverage Ratio	3.55	2.25

	Age of Plant	7.80	6.80

Ex 4-26

Exhibit 4-26 Financial Ratios for Avon Hospital

	Ratio	20X1	20X0

	Current Ratio	0.50	1.60
	Acid Test Ratio	0.02	0.35
	Days in Accounts Receivable	120 days	80 days
	Average Payment Period	95 days	75 days
	Days Cash on Hand	5 days	15 days

	Fixed Asset Turnover	0.75	1.00
	Total Asset Turnover	0.95	1.20

	Operating Margin	-0.08	-0.01
	Return on Assets	-0.01	0.02

	Long-Term Debt to Equity	3.11	2.10
	Equity to Total Assets	0.10	0
	Debt Service Coverage Ratio	1.25	2.01

	Age of Plant	10.01	7.85

Ex 4-27a

Exhibit 4-27a Statement of Operations for Lake Community Hospital

	Lake Community Hospital
	Statement of Operations (in '000)
	For the Years Ended 12/31/20X1 and 12/31/20X0
		20X1	20X0
	Revenues:
	Net Patient Service Revenue	$20,000	$17,000
	Other Operating Revenue	2,500	2,000
	Total Revenues	22,500	19,000

	Operating Expenses:
	Nursing Services	12,000	10,000
	Administrative Services	4,000	3,500
	(includes Bad Debt Expense of $100)
	Depreciation	1,000	1,200
	General Services	2,500	2,500
	Fiscal Services	400	400
	Professional/Ancillary Services	3,500	3,000
	Interest	1,000	1,000
	Total Expenses	24,400	21,600

	Income from Operations	(1,900)	(2,600)
	Non-Operating Income:
	Investment Income / Contributions	3,000	3,000
	Excess of Revenues over Expenses	1,100	400

	Net Income	$1,100	$400

Ex 4-27b

Exhibit 4-27a Balance Sheet for Lake Community Hospital

	Lake Community Hospital
	Balance Sheet (in '000)
	For the Years Ended 12/31/20X1 and 12/31/20X0
		20X1	20X0
	Current Assets:
	Cash and Cash Equivalents	$1,300	$800
	Net Patient Accounts Receivables	3,500	4,000
	Inventories	2,000	1,800
	Other Current Assets	100	80
	Total Current Assets	6,900	6,680

	Plant, Property, & Equipment
	Gross Plant, Property, & Equipment	21,000	22,000
	(less Accumulated Depreciation)	(6,500)	(5,500)
	Net Property, Plant and Equipment	14,500	16,500

	Funded Depreciation / Board Designated Funds
	Cash and Short-Term Investments	4,000	1,500

	Total Assets	$25,400	$24,680


	Current Liabilities:
	Accounts Payable	$3,000	$3,200
	Salaries Payable	30	25
	Notes Payable	250	300
	Total Current Liabilities	3,280	3,525

	Long-Term Liabilities:
	Bonds Payable	15,000	18,000
	Total Long-Term Liabilities	15,000	18,000

	Net Assets	7,120	3,155

	Total Liabilities and Net Assets	$25,400	$24,680

Ex 4-28a

Exhibit 4-28a Pine Island Regional Hospital Statement of Operations

	Pine Island Regional Hospital
	Statement of Operations (in 000's)
	For the Years Ended 12/31/20X1 and 12/31/20X0

		12/31/20X1	12/31/20X0
	Revenues:
	Net Patient Service Revenue	$55,000	$62,000
	Net Assets Released from Restriction	5,000	4,000
	Other Operating Revenue	3,000	7,000
	Total Revenues	63,000	73,000

	Expenses:
	Nursing Services	20,000	25,000
	Administrative Services	18,000	22,000
	Depreciation	5,000	5,000
	Interest	4,000	4,000
	General Services	8,000	3,000
	Total Expenses	55,000	59,000

	Operating Income	8,000	14,000

	Excess of Revenues over Expenses	8,000	14,000

	Increase (Decrease) in Net Assets	$8,000	$14,000

Ex 4-28b

Exhibit 4-28b Pine Island Regional Hospital Balance Sheet

	Pine Island Regional Hospital
	Balance Sheet (in 000's)
	For the Years Ended 12/31/20X1 and 12/31/20X0

		12/31/20X1	12/31/20X0
	Current Assets:
	Cash and Cash Equivalents	$4,200	$4,750
	Net Patient Receivables	6,000	6,500
	Inventory	300	250
	Prepaid Expenses	750	800
	Total Current Assets	11,250	12,300

	Plant, Property, & Equipment
	Gross Plant, Property, & Equipment	55,000	60,000
	(less Accumulated Depreciation)	(30,000)	(25,000)
	Net Property, Plant and Equipment	25,000	35,000

	Long-Term Investments	2,000	1,500

	Total Assets	$38,250	$48,800


	Current Liabilities:
	Accounts Payable	$5,500	$4,800
	Salaries Payable	1,075	950
	Total Current Liabilities	6,575	5,750

	Long-Term Liabilities:
	Bonds Payable	20,000	25,000
	Total Long-Term Liabilities	20,000	25,000

	Net Assets	11,675	18,050

	Total Liabilities and Net Assets	$38,250	$48,800

Ex 4-29a

Exhibit 4-29a Rocky Mountain Resort Hospital Statement of Operations

	Rocky Mountain Resort Hospital
	Statement of Operations (in 000's)
	For the Years Ended 12/31/20X1 and 12/31/20X0

		12/31/20X1	12/31/20X0
	Revenues:
	Net Patient Service Revenue	$45,000	$30,000
	Net Assets Released from Restriction	12,000	9,000
	Other Operating Revenue	10,000	7,000
	Total Revenues	67,000	46,000

	Expenses:
	Nursing Services	33,000	31,000
	Administrative Services	13,000	8,000
	Depreciation Expense	8,000	4,000
	Interest Expense	4,000	500
	General Services	5,000	4,000
	Total Expenses	63,000	47,500

	Operating Income	4,000	(1,500)

	Excess of Revenues over Expenses	4,000	(1,500)

	Increase (Decrease) in Net Assets	$4,000	($1,500)

Ex 4-29b

Exhibit 4-29b Rocky Mountain Resort Hospital Balance Sheet

	Rocky Mountain Resort Hospital
	Balance Sheet (in 000's)
	For the Years Ended 12/31/20X1 and 12/31/20X0

		12/31/20X1	12/31/20X0
	Current Assets:
	Cash and Cash Equivalents	$3,800	$8,750
	Net Patient Receivables	15,000	11,500
	Inventory	2,300	1,250
	Prepaid Expenses	5,500	4,500
	Total Current Assets	26,600	26,000

	Plant, Property, & Equipment
	Gross Plant, Property, & Equipment	65,000	40,000
	(less Accumulated Depreciation)	(20,000)	(15,000)
	Net Property, Plant and Equipment	45,000	25,000

	Long-Term Investments	2,000	10,500

	Total Assets	$73,600	$61,500


	Current Liabilities:
	Accounts Payable	$8,500	$3,800
	Salaries Payable	950	700
	Total Current Liabilities	9,450	4,500

	Long-Term Liabilities:
	Bonds Payable	40,000	5,000
	Total Long-Term Liabilities	40,000	5,000

	Net Assets	24,150	52,000

	Total Liabilities and Net Assets	$73,600	$61,500

Ex 4-30a

Exhibit 4-30a Balance Sheet for Williamson Academic Medical Center

	Williamson Academic Medical Center
	Balance Sheet (in '000)
	For the Years Ended December 31, 20X0 and 20X1

		12/31/20X1	12/31/20X0
	Current Assets:
	Cash & Cash Equivalents	$1,000	$800
	Patient Accounts Receivables, Net	4,500	5,500
	Inventories	2,000	1,800
	Other Current Assets	100	80
	Total Current Assets	7,600	8,180

	Plant, Property, & Equipment
	Gross Plant, Property, & Equipment	18,000	18,500
	(less Accumulated Depreciation)	(6,500)	(5,500)
	Net Property, Plant and Equipment	11,500	13,000

	Long-Term Investments	2,000	1,500

	Total Assets	$21,100	$22,680


	Current Liabilities:
	Accounts Payable	$4,000	$4,200
	Salaries Payable	30	25
	Notes payable	250	300
	Other Current Liabilities	0	0
	Total Current Liabilities	4,280	4,525

	Non-Current Liabilities:
	Bonds Payable	10,000	12,000
	Total Non-Current Liabilities	10,000	12,000

	Net Assets	6,820	6,155

	Total Liabilities and Net Assets	$21,100	$22,680

Ex 4-30b

Exhibit 4-30b Income Statement for Williamson Academic Medical Center

	Williamson Academic Medical Center
	Income Statement (in '000)
	For the Years Ended December 31, 20X0 and 20X1

		12/31/20X1	12/31/20X0
	Revenues:
	Net Patient Revenues	$20,000	$17,000
	Other Operating Revenues	2,500	2,000
	Total Revenues	22,500	19,000

	Expenses:
	Nursing Services	8,000	7,000
	Administrative Services	4,000	3,500
	(includes bad debt expense of $100,000)
	Depreciation	500	500
	General Services	2,500	2,500
	Fiscal Services	400	400
	Professional/Ancillary Services	3,500	3,000
	Interest	1,000	1,000
	Total Expenses	19,900	17,900

	Income from Operations	2,600	1,100
	Non-Operating Income:
	Investment Income + Contributions	400	2,000

	Excess of Revenues over Expenses	3,000	3,100

	Increase (Decrease) in Net Assets	$3,000	$3,100

Q4.1a-

Q4.2-4.3

Q4.4

Q4.5-4.6

Q4.7-4.8

Q4.9-4.10

9. Debt service coverage ratio measures how much cash flow an organization has to meet debt service payments. 10. Health care providers with higher age of plant ratio values would have older assets.

Pr 4.11

Problem 4.11 Glen Hall Hospital

		Industry	Glen Hall
	Profitibility Ratios	Standard	Hospital	Formula

	Operating Margin	0.041	(0.031)	Operating Income / Total Operating Revenues

	Return on Total Assets	0.075	0.024	Excess of Revenues over Expenses / Total Assets

	Non-Operating Ratio	0.040	0.104	Non-operating Revenues and Other Income / Total Operating Revenues


	Operating Margin is negative, suggesting a loss from operations (expenses exceed revenues).
	Return on Total Assets is low, suggesting that revenues are inadequate.
	Non-Operating Ratio is also low, suggesting that revenues from other sources is scarce.

	In short, it appears that operating and non-operating revenues for Glen Hall are both too low,
	that assets are not being used wisely, and that the hospital is headed for Chapter 11.

Prob 4.12x

Problem 4.12

	Replace with Exhibit 4-18 after it gets finished, and modify

Pr 4.13

Problem 4.13 Dogwood Hospital

		A	B	C		D	E	F	G
	(in '000)
		12/31/20X1	12/31/20X0	Standard		20X1	20X1	20X0	20X0
	Ratio1	[D/E]	[F/G]	[Given]		Numerator	Denominator	Numerator	Denominator

	Current Ratio	1.37	1.52	1.95		$405	$295	$365	$240
	Acid Test Ratio	0.10	0.21	0.31		$30	$295	$50	$240
	Days in Accounts Receivable	77	71	65		$295	$3.84	$235	$3.29
	Average Payment Period (Days)	73	68	66		$295	$4.05	$240	$3.52

	Operating Margin	0.06	0.07	0.02		$100	$1,600	$100	$1,400
	Return on Total Assets	0.11	0.16	0.04		$100	$888	$100	$615

	Total Asset Turnover Ratio	1.80	2.28	0.85		$1,600	$888	$1,400	$615
	Fixed Asset Turnover Ratio	5.71	5.60	3.45		$1,600	$280	$1,400	$250

	Long-Term Debt to Net Assets	0.20	0.06	0.48		$100	$493	$20	$355
	Net Assets to Total Assets	0.56	0.58	0.56		$493	$888	$355	$615

	[1] Legend
	Liquidity	Current Ratio			Current Assets / Current Liabilities
		Acid Test Ratio			(Cash + Marketable Securities) / Current Liabilities
		Days in Accounts Receivable			Net Patient Accounts Receivables / (Net Patient Revenues / 365)
		Average Payment Period			Current Liabilities / ((Operating Expenses - Depreciation Expense) / 365)
	Profitability	Operating Margin			Operating Income / Total Operating Revenues
		Return on Total Assets			Excess of Revenues over Expenses / Total Assets
	Activity	Total Asset Turnover Ratio			Total Revenues / Total Assets
		Fixed Assets Turnover Ratio			Total Revenues / Net Plant and Equipment
	Capital Structure	Long-Term Debt to Net Assets			Long-Term Debt / Net Assets
		Net Assets to Total Assets			Net Assets / Total Assets

	Liquidity: Dogwood has some trouble meeting current obligations, and bills are taking longer to collect and pay out.
	Profitability: Quite profitable relative to the standard.
	Activity: Assets are being used efficiently. Revenues are high for a facility of its size.
	Capital Structure: Institution is well-leveraged.
	Comment on changes if Dogwood were 450 beds.

Pr 4.14

Problem 4.14 Maryville Hospital

		A	B	C		D	E	F	G
	(in '000)
		12/31/20X1	12/31/20X0	Standard		20X1	20X1	20X0	20X0
	Ratio[1]	[D/E]	[F/G]	[Given]		Numerator	Denominator	Numerator	Denominator

	Current Ratio	1.98	2.06	1.94		$3,950	$2,000	$5,250	$2,550
	Quick Ratio	1.63	1.75	1.54		$3,250	$2,000	$4,450	$2,550
	Acid Test Ratio	0.38	0.25	0.31		$750	$2,000	$650	$2,550
	Days in Accounts Receivable	52	77	64		$2,500	$48	$3,800	$49
	Days Cash on Hand	15	13	44		$750	$50	$650	$50
	Average Payment Period (Days)	40	51	69		$2,000	$50	$2,550	$50

	Operating Margin	0.04	-0.03	0.03		$800	$20,000	($550)	$18,550
	Non-Operating Revenue	0.13	0.03	0.06		$2,500	$20,000	$550	$18,550
	Return on Total Assets	0.03	-0.02	0.05		$800	$24,950	($550)	$23,750
	Return on Net Assets	0.06	-0.05	0.10		$800	$12,450	($550)	$10,200

	Total Asset Turnover Ratio	0.80	0.78	0.79		$20,000	$24,950	$18,550	$23,750
	Fixed Asset Turnover Ratio	1.43	1.33	3.44		$20,000	$14,000	$18,550	$14,000
	Age of Plant Ratio	6.00	5.00	9.93		$6,000	$1,000	$5,000	$1,000

	Long-Term Debt to Net Assets	0.84	1.08	0.56		$10,500	$12,450	$11,000	$10,200
	Net Assets to Total Assets	0.50	0.43	0.55		$12,450	$24,950	$10,200	$23,750

	[1] Legend
	Liquidity	Current Ratio			Current Assets / Current Liabilities
		Quick Ratio			(Cash + Marketable Securities + Net Receivables) / Current Liabilities
		Acid Test Ratio			(Cash + Marketable Securities) / Current Liabilities
		Days in Accounts Receivable			Net Patient Accounts Receivables / (Net Patient Revenues / 365)
		Days Cash on Hand			(Cash + Marketable Securities) / ((Operating Expenses - Depreciation Expense) / 365)
		Average Payment Period			Current Liabilities / ((Operating Expenses - Depreciation Expense) / 365)
	Profitability	Operating Margin			Operating Income / Total Operating Revenues
		Non-operating Revenue Ratio			Non-operating Revenues and Other Income / Total Operating Revenues
		Return on Total Assets			Excess of Revenues over Expenses / Total Assets
		Return on Net Assets			Excess of Revenues over Expenses / Net Assets
	Activity	Total Asset Turnover Ratio			Total Revenues / Total Assets
		Fixed Assets Turnover Ratio			Total Revenues / Net Plant and Equipment
		Age of Plant Ratio			Accumulated Depreciation / Depreciation Expense
	Capital Structure	Long-Term Debt to Net Assets Ratio			Long-Term Debt / Net Assets
		Net Assets to Total Assets Ratio			Net Assets / Total Assets

Pr 4.15

Problem 4.15 Hollywood Community Hospital

	Ratio	20X1	20X0	Standard	Formula

	Liquidity Ratios
	Current Ratio	4.05	2.30	1.95	Current Assets / Current Liabilities
	Acid Test Ratio	0.95	0.20	0.31	(Cash + Marketable Securities) / Current Liabilities
	Days in Accounts Receivable	75	65	65	Net Patient Accounts Receivables / (Net Patient Revenues / 365)
	Days Cash on Hand	25	5	43	Current Liabilities / ((Operating Expenses - Depreciation Expense) / 365)
	Average Payment Period (Days)	55	55	66	(Cash + Marketable Securities) / ((Operating Expenses - Depreciation Expense) / 365)

	Profitability Ratios
	Operating Margin	-0.05	0.02	0.02	Operating Income / Total Operating Revenues
	Return on Net Assets	0.01	0.06	0.09	Excess of Revenues over Expenses / Net Assets

	Activity Ratios
	Total Asset Turnover Ratio	1.15	1.05	0.85	Total Revenues / Total Assets
	Fixed Asset Turnover Ratio	3.45	2.60	3.45	Total Revenues / Net Plant and Equipment
	Age of Plant	5.05	5.78	10.01	Accumulated Depreciation / Depreciation Expense

	Capital Structure Ratios
	Long-Term Debt to Net Assets (Equity)	2.95	1.18	0.48	Long-Term Debt / Net Assets
	Net Assets to Total Assets	0.34	0.46	0.56	Net Assets / Total Assets

	Between 20X0 and 20X1, the hospital was in a much better position
	to meet short-term obligations. Though collection time increased,
	it was paying its bills, yet still retaining more liquidity than before.

	However, it appears that expenses now exceed revenues, and
	that the institution is more heavily into debt than before. In other
	words, the hospital is meeting needs more through borrowing,
	rather than through operational effectiveness. This is a problem.

Pr 4.16

Problem 4.16 McGill Healthcare System

	Ratio	20X1	20X0	Standard	Formula

	Current Ratio	1.75	2.50	1.84	Current Assets / Current Liabilities
	Quick Ratio	1.01	1.85	1.48	(Cash + Marketable Securities + Net Receivables) / Current Liabilities
	Acid Test Ratio	0.15	0.35	0.11	(Cash + Marketable Securities) / Current Liabilities
	Days in Accounts Receivable	55	65	68	Net Patient Accounts Receivables / (Net Patient Revenues / 365)
	Days Cash on Hand	12	35	45	(Cash + Marketable Securities) / ((Operating Expenses - Depreciation Expense) / 365)
	Average Payment Period (Days)	40	45	67	Current Liabilities / ((Operating Expenses - Depreciation Expense) / 365)

	Operating Margin	0.03	0.02	0.04	Operating Income / Total Operating Revenues
	Non-Operating Revenue	0.25	0.10	0.09	Non-operating Revenues and Other Income / Total Operating Revenues
	Return on Assets	0.06	0.04	0.04	Excess of Revenues over Expenses / Total Assets

	Total Asset Turnover Ratio	0.65	1.10	0.81	Total Revenues / Total Assets
	Fixed Asset Turnover Ratio	0.95	3.20	3.62	Total Revenues / Net Plant and Equipment
	Age of Plant	4.50	10.01	9.74	Accumulated Depreciation / Depreciation Expense

	Long-Term Debt to Equity	0.22	0.25	0.64	Long-Term Debt / Net Assets
	Equity to Total Assets	0.65	0.35	0.52	Net Assets / Total Assets
	Debt Service Coverage Ratio	5.55	4.55	5.59	(Excess of Revenues over Expenses + Interest Expense + Depreciation Expense) /
					(Interest Expense + Principal Payments)

	McGill Healthcare System is in an interesting financial position, generally positive.

	Liquidity ratios for McGill sugest that its ability to meet short-term obligations has decreased; the Quick Ratio dropped
	precipitously and Days Cash on Hand has fallen quite low. However, receivables are being collected more efficiently,
	and bills are being paid more quickly, so meeting current obligations shouldn't pose a problem.

	McGill's operating margin is improving; though high, non-operating revenues only tend to be a fraction of total revenues.
	Revenues as a measure of investments are quite low, but it appears that most equipment is fairly new, so there is
	current opportunity to take advantage of a fairly new infrastructure to increase total revenues. Additionally, long-term
	debt is quite low, so McGill could always borrow as need be if the need arose.

Pr 4.17

Problem 4.17 Hope Community Hospital

	Ratio	20X1	20X0	Standard[1]	Formula

	Liquidity Ratios
	Current Ratio	1.78	1.81	2.06	Current Assets / Current Liabilities
	Quick Ratio	1.29	1.39	1.69	(Cash + Marketable Securities + Net Receivables) / Current Liabilities
	Acid Test Ratio	0.23	0.18	0.26	(Cash + Marketable Securities) / Current Liabilities
	Average Collection Period (Days)	82	118	66	Net Patient Accounts Receivables / (Net Patient Revenues / 365)
	Days Cash on Hand	19	17	47	(Cash + Marketable Securities) / ((Operating Expenses - Depreciation Expense) / 365)
	Average Payment Period (Days)	81	95	58	Current Liabilities / ((Operating Expenses - Depreciation Expense) / 365)

	Profitability Ratios
	Operating Margin	0.12	0.06	0.03	Operating Income / Total Operating Revenues
	Non-operating Revenue	0.02	0.11	0.05	Non-operating Revenues and Other Income / Total Operating Revenues
	Return on Total Assets	0.14	0.14	0.04	Excess of Revenues over Expenses / Total Assets
	Return on Net Assets	0.44	0.50	0.08	Excess of Revenues over Expenses / Net Assets

	Activity Ratios
	Total Asset Turnover Ratio	1.07	0.84	0.93	Total Revenues / Total Assets
	Fixed Asset Turnover Ratio	1.96	1.46	3.50	Total Revenues / Net Plant and Equipment
	Age of Plant	13.00	11.00	9.53	Accumulated Depreciation / Depreciation Expense

	Capital Structure Ratios
	Long-Term Debt to Net Assets	1.47	1.95	0.38	Long-Term Debt / Net Assets
	Net Assets to Total Assets	0.32	0.27	0.60	Net Assets / Total Assets
	Times Interest Earned	4.00	4.10	4.29	(Excess of Revenues over Expenses + Interest Expense) / Interest Expense
	Debt Service Coverage Ratio	1.50	1.53	4.06	(Excess of Revenues over Expenses + Interest Expense + Depreciation Expense) /
					(Interest Expense + Principal Payments)
	[1] Because the size of the facility is unknown, industry-wide median ratios are used.

	In general, Hope Community's liquidity position improved: while as able
	to meet current obligations as before, collection time has decreased,
	and bills are being paid in a more timely manner.

	Assets are being used well, and the institution is profitable. In addition,
	Hope is not as highly leveraged before. However, it appears that its
	durable equipment is aging, which implies the need to make some
	major investments in the near future to continue to operate effectively.

Pr 4.18

Problem 4.18 St. Jude's Hospital

	Ratio	20X1	20X0	Standard[1]	Formula

	Liquidity Ratios
	Current Ratio	2.10	2.20	2.06	Current Assets / Current Liabilities
	Acid Test Ratio	0.10	0.25	0.26	(Cash + Marketable Securities) / Current Liabilities
	Days in Accounts Receivable	60	45	66	Net Patient Accounts Receivables / (Net Patient Revenues / 365)
	Days Cash on Hand	5	15	47	(Cash + Marketable Securities) / ((Operating Expenses - Depreciation Expense) / 365)
	Average Payment Period (Days)	45	43	58	Current Liabilities / ((Total Expenses - Depreciation Expense) / 365)

	Profitability Ratios
	Operating Margin	0.03	0.10	0.03	Operating Income / Total Operating Revenues
	Return on Total Assets	0.12	0.20	0.04	Excess of Revenues over Expenses / Total Assets

	Activity Ratios
	Total Asset Turnover Ratio	1.04	1.10	0.93	Total Revenues / Total Assets
	Fixed Asset Turnover Ratio	2.54	3.58	3.50	Total Revenues / Net Plant and Equipment
	Age of Plant	3.50	5.70	9.53	Accumulated Depreciation / Depreciation Expense

	Capital Structure Ratios
	Long-Term Debt to Equity	2.18	1.10	0.38	Long-Term Debt / Equity
	Equity to Total Assets	0.42	0.55	0.60	Equity / Total Assets
	Debt Service Coverage Ratio	2.10	3.20	4.06	(Excess of Revenues over Expenses + Interest Expense + Depreciation Expense) /
					(Interest Expense + Principal Payments)

	[1] Because the size of the facility is unknown, industry-wide median ratios are used.

	St. Jude's' ability to meet short-term obligations decreased from
	20X0 to 20X1, collection time increased, and it could only
	survive on its own for a few days without external revenues.
	Time to pay bills has also increased slightly.

	Assets are being used less effectively, and the returns on
	investment have diminished as well, suggesting revenues are
	having a harder time offsetting expenses.

	Last, the hospital is more highly leveraged than before. All this
	suggests that the hospitral is headed for Chapter 11.

Pr 4.19

Problem 4.19 Swayze Community Hospital

	Ratio	20X1	20X0	Standard	Formula

	Current Ratio	2.25	1.95	1.94	Current Assets / Current Liabilities
	Quick Ratio	1.65	1.45	1.54	(Cash + Marketable Securities + Net Receivables) / Current Liabilities
	Acid Test Ratio	0.10	0.25	0.31	(Cash + Marketable Securities) / Current Liabilities
	Days in Accounts Receivable	80	50	64	Net Patient Accounts Receivables / (Net Patient Revenues / 365)
	Days Cash on Hand	15	35	44	(Cash + Marketable Securities) / ((Operating Expenses - Depreciation Expense) / 365)
	Average Payment Period (Days)	65	75	69	Current Liabilities / ((Operating Expenses - Depreciation Expense) / 365)

	Operating Margin	0.08	0.06	0.03	Operating Income / Total Operating Revenues
	Return on Assets	0.10	0.07	0.05	Excess of Revenues over Expenses / Total Assets

	Total Asset Turnover Ratio	1.12	1.10	0.79	Total Revenues / Total Assets
	Fixed Asset Turnover Ratio	3.50	3.20	3.44	Total Revenues / Net Plant and Equipment
	Age of Plant	7.80	6.80	9.93	Accumulated Depreciation / Depreciation Expense

	Long-Term Debt to Net Assets	0.55	0.68	0.56	Long-Term Debt / Net Assets
	Net Assets to Total Assets	0.45	0.35	0.55	Net Assets / Total Assets
	Debt Service Coverage Ratio	3.55	2.25	4.61	(Excess of Revenues over Expenses + Interest Expense + Depreciation Expense) /
					(Interest Expense + Principal Payments)

	Swayze is in good financial shape, but there is the opportunity for some improvement.

	Current obligations should be met without difficulty, but the low Acid Test Ratio and Days Cash on Hand suggest
	that perhaps more cash should be kept on hand. There is no evidence that Swayze has a parent corporation,
	but if so, the parent could always step in as need be. While debts are being paid off faster, bills are being collected slower.

	Swayze has a healthy margin/return on its assets and investments, significantly above the average for hospitals
	of similar size. Revenues are strong, and equipment won't need replacing for a while. Furthermore, Swayze has
	lowered its debt and increased Net Assets, suggesting that it could easily borrow capital when the need arises.

Pr 4.20

Problem 4.20 Avon Hospital

	Ratio	20X1	20X0	Standard	Formula

	Current Ratio	0.50	1.60	2.18	Current Assets / Current Liabilities
	Acid Test Ratio	0.02	0.35	0.35	(Cash + Marketable Securities) / Current Liabilities
	Days in Accounts Receivable	120	80	67	Net Patient Accounts Receivables / (Net Patient Revenues / 365)
	Days Cash on Hand	5	15	46	(Cash + Marketable Securities) / ((Operating Expenses - Depreciation Expense) / 365)
	Average Payment Period (Days)	95	75	54	Current Liabilities / ((Operating Expenses - Depreciation Expense) / 365)

	Operating Margin	-0.08	-0.01	0.02	Operating Income / Total Operating Revenues
	Return on Assets	-0.01	0.02	0.03	Excess of Revenues over Expenses / Total Assets

	Total Asset Turnover	0.95	1.20	1.02	Total Revenues / Total Assets
	Fixed Asset Turnover	0.75	1.00	3.59	Total Revenues / Net Plant and Equipment
	Age of Plant	10.01	7.85	9.86	Accumulated Depreciation / Depreciation Expense

	Long-Term Debt to Equity	3.11	2.10	0.21	Long-Term Debt / Net Assets
	Equity to Total Assets	0.10	0	0.62	Net Assets / Total Assets
	Debt Service Coverage Ratio	1.25	2.01	3.35	(Excess of Revenues over Expenses + Interest Expense + Depreciation Expense) /
					(Interest Expense + Principal Payments)

	Avon Hospital has one foot in the grave, and the dirt under the other foot is starting to crumble.
	If this institution were once a castle, it was a castle made of sand.

	Avon is in danger of no longer being able to meet its current obligations. It is inept at being able
	to collect its bills, it is taking increasingly and unacceptably longer to pay off its debts, and it
	barely has the funds to survive on its own for only a few days.

	The institution is rapidly losing money, its assets are being used inefficiently, and it is very highly
	leveraged. In addition, its equipment is getting old and in need of replacement, but there is noplace
	else from which to draw funds. The only hope for this institution is for a governmental bailout,
	or else to be bought out by a conglomerate which has the funds necessary to turn it around.

Pr 4.21a

Problem 4.21a Lake Community Hospital

	Lake Community Hospital
	Statement of Operations (Horizontal and Vertical Analyses) (in '000)
	For the Years Ended 12/31/20X1 and 12/31/20X0
			% of Total		% of Total	% Change
		20X1	Revenues	20X0	Revenues	20X0-20X1
	Revenues:
	Net Patient Service Revenue	$20,000	89%	$17,000	89%	18%
	Other Operating Revenue	2,500	11%	2,000	11%	25%
	Total Revenues	22,500	100%	19,000	100%	18%

	Operating Expenses:
	Nursing Services	12,000	53%	10,000	53%	20%
	Administrative Services	4,000	18%	3,500	18%	14%
	(includes Bad Debt Expense of $100)
	Depreciation	1,000	4%	1,200	6%	-17%
	General Services	2,500	11%	2,500	13%	0%
	Fiscal Services	400	2%	400	2%	0%
	Professional/Ancillary Services	3,500	16%	3,000	16%	17%
	Interest	1,000	4%	1,000	5%	0%
	Total Expenses	24,400	108%	21,600	114%	13%

	Income from Operations	(1,900)	-8%	(2,600)	-14%	-27%
	Non-Operating Income:
	Investment Income / Contributions	3,000	13%	3,000	16%	0%
	Excess of Revenues over Expenses	1,100	5%	400	2%	175%

	Net Income	$1,100	5%	$400	2%	175%

Pr 4.21b

Problem 4.21b Lake Community Hospital

	Lake Community Hospital
	Balance Sheet (Horizontal and Vertical Analyses) (in '000)
	For the Years Ended 12/31/20X1 and 12/31/20X0
			% Total		% Total	% Change
		20X1	Assets	20X0	Assets	20X0-20X1
	Current Assets:
	Cash and Cash Equivalents	$1,300	5%	$800	3%	63%
	Net Patient Accounts Receivables	3,500	14%	4,000	16%	-13%
	Inventories	2,000	8%	1,800	7%	11%
	Other Current Assets	100	0%	80	0%	25%
	Total Current Assets	6,900	27%	6,680	27%	3%

	Plant, Property, & Equipment
	Gross Plant, Property, & Equipment	21,000	83%	22,000	89%	-5%
	(less Accumulated Depreciation)	(6,500)	-26%	(5,500)	-22%	18%
	Net Property, Plant and Equipment	14,500	57%	16,500	67%	-12%

	Funded Depreciation / Board Designated Funds
	Cash and Short-Term Investments	4,000	16%	1,500	6%	167%

	Total Assets	$25,400	100%	$24,680	100%	3%


	Current Liabilities:
	Accounts Payable	$3,000	12%	$3,200	13%	-6%
	Salaries Payable	30	0%	25	0%	20%
	Notes Payable	250	1%	300	1%	-17%
	Total Current Liabilities	3,280	13%	3,525	14%	-7%

	Long-Term Liabilities:
	Bonds Payable	15,000	59%	18,000	73%	-17%
	Total Long-Term Liabilities	15,000	59%	18,000	73%	-17%

	Net Assets	7,120	28%	3,155	13%	126%

	Total Liabilities and Net Assets	$25,400	100%	$24,680	100%	3%

Pr 4.21c

Problem 4.21c Lake Community Hospital

	Ratio	20X1	20X0	Standard	Formula

	Liquidity Ratios
	Current Ratio	2.10	1.90	1.95	Current Assets / Current Liabilities
	Quick Ratio	1.46	1.36	1.57	(Cash + Marketable Securities + Net Receivables) / Current Liabilities
	Acid Test Ratio	0.40	0.23	0.31	(Cash + Marketable Securities) / Current Liabilities
	Days in Accounts Receivable	64	86	65	Net Patient Accounts Receivables / (Net Patient Revenues / 365)
	Average Payment Period	51	63	43	Current Liabilities / ((Operating Expenses - Depreciation Expense) / 365)
	Days Cash on Hand	20	14	66	(Cash + Marketable Securities) / ((Operating Expenses - Depreciation Expense) / 365)

	Profitability Ratios
	Operating Margin	(0.08)	(0.14)	0.02	Operating Income / Total Operating Revenues
	Non-operating Revenue	0.13	0.16	0.04	Non-operating Revenues and Other Income / Total Operating Revenues
	Return on Total Assets	0.04	0.02	0.04	Excess of Revenues over Expenses / Total Assets
	Return on Net Assets	0.15	0.13	0.09	Excess of Revenues over Expenses / Net Assets

	Activity Ratios
	Total Asset Turnover Ratio	0.89	0.77	0.85	Total Revenues / Total Assets
	Fixed Asset Turnover Ratio	1.55	1.15	3.45	Total Revenues / Net Plant and Equipment
	Age of Plant	6.50	4.58	10.01	Accumulated Depreciation / Depreciation Expense

	Capital Structure Ratios
	Long-Term Debt to Net Assets	2.11	5.71	0.48	Long-Term Debt / Net Assets
	Net Assets to Total Assets	0.28	0.13	0.56	Net Assets / Total Assets
	Times Interest Earned	2.10	1.40	4.30	(Excess of Revenues over Expenses + Interest Expense) / Interest Expense
	Debt Service Coverage Ratio[1]	2.98	2.50	3.73	(Excess of Revenues over Expenses + Interest Expense + Depreciation Expense) /
					(Interest Expense + Principal Payments)
	[1] The debt service payments each year are $40,000.

	Though it is still losing money (negative operating margin), Lake's financial condition shows signs of improvement.
	Its debts are being paid off more quickly, collection time has decreased, and assets are being used more effectively.

	Lake is less highly leveraged than before, and its equipment should still last for a while. The institution has the
	opportunity to increase revenues and/or decrease costs and should be able to return to profitability.

Pr 4.22a

Problem 4-22a Pine Island Regional Hospital

	Pine Island Regional Hospital
	Balance Sheet (Horizontral and Vertical Analyses) (in 000's)
	For the Years Ended 12/31/20X1 and 12/31/20X0
			% Total		% Total	% Change
		12/31/20X1	Assets	12/31/20X0	Assets	20X0-20X1
	Current Assets:
	Cash and Cash Equivalents	$4,200	11%	$4,750	10%	-12%
	Net Patient Receivables	6,000	16%	6,500	13%	-8%
	Inventory	300	1%	250	1%	20%
	Prepaid Expenses	750	2%	800	2%	-6%
	Total Current Assets	11,250	29%	12,300	25%	-9%

	Plant, Property, & Equipment
	Gross Plant, Property, & Equipment	55,000	144%	60,000	123%	-8%
	(less Accumulated Depreciation)	(30,000)	-78%	(25,000)	-51%	20%
	Net Property, Plant and Equipment	25,000	65%	35,000	72%	-29%

	Long-Term Investments	2,000	5%	1,500	3%	33%

	Total Assets	$38,250	100%	$48,800	128%	-22%


	Current Liabilities:
	Accounts Payable	$5,500	14%	$4,800	13%	15%
	Salaries Payable	1,075	3%	950	2%	13%
	Total Current Liabilities	6,575	17%	5,750	15%	14%

	Long-Term Liabilities:
	Bonds Payable	20,000	52%	25,000	65%	-20%
	Total Long-Term Liabilities	20,000	52%	25,000	65%	-20%

	Net Assets	11,675	31%	18,050	47%	-35%

	Total Liabilities and Net Assets	$38,250	100%	$48,800	128%	-22%

Pr 4.22b

Problem 4-22b Pine Island Regional Hospital

	Pine Island Regional Hospital
	Statement of Operations (Horizontal and Vertical Analyses) (in 000's)
	For the Years Ended 12/31/20X1 and 12/31/20X0
			% of Total		% of Total	% Change
		12/31/20X1	Revenues	12/31/20X0	Revenues	20X0-20X1
	Revenues:
	Net Patient Service Revenue	$55,000	87%	$62,000	85%	-11%
	Net Assets Released from Restriction	5,000	8%	4,000	5%	25%
	Other Operating Revenue	3,000	5%	7,000	10%	-57%
	Total Revenues	63,000	100%	73,000	100%	-14%

	Expenses:
	Nursing Services	20,000	32%	25,000	34%	-20%
	Administrative Services	18,000	29%	22,000	30%	-18%
	Depreciation	5,000	8%	5,000	7%	0%
	Interest	4,000	6%	4,000	5%	0%
	General Services	8,000	13%	3,000	4%	167%
	Total Expenses	55,000	87%	59,000	81%	-7%

	Operating Income	8,000	13%	14,000	19%	-43%

	Excess of Revenues over Expenses	8,000	13%	14,000	19%	-43%

	Increase (Decrease) in Net Assets	$8,000	13%	$14,000	19%	-43%

Pr 4.22c

Problem 4.22c Pine Island Regional Hospital

	Ratio	20X1	20X0	Standard	Formula

	Liquidity Ratios
	Current Ratio	1.71	2.14	1.94	Current Assets / Current Liabilities
	Quick Ratio	1.55	1.96	1.54	(Cash + Marketable Securities + Net Receivables) / Current Liabilities
	Acid Test Ratio	0.64	0.83	0.31	(Cash + Marketable Securities) / Current Liabilities
	Days in Accounts Receivable	40	38	64	Net Patient Accounts Receivables / (Net Patient Revenues / 365)
	Days Cash on Hand	31	32	44	(Cash + Marketable Securities) / ((Operating Expenses - Depreciation Expense) / 365)
	Average Payment Period (Days)	48	39	69	Current Liabilities / ((Operating Expenses - Depreciation Expense) / 365)

	Profitability Ratios
	Operating Margin	0.127	0.192	0.031	Operating Income / Total Operating Revenues
	Non-operating Revenue	0.000	0.000	0.058	Non-operating Revenues and Other Income / Total Operating Revenues
	Return on Total Assets	0.209	0.287	0.045	Excess of Revenues over Expenses / Total Assets
	Return on Net Assets	0.685	0.776	0.097	Excess of Revenues over Expenses / Net Assets

	Activity Ratios
	Total Asset Turnover Ratio	1.65	1.50	0.79	Total Revenues / Total Assets
	Fixed Asset Turnover Ratio	2.52	2.09	3.44	Total Revenues / Net Plant and Equipment
	Age of Plant	6.00	5.00	9.93	Accumulated Depreciation / Depreciation Expense

	Capital Structure Ratios
	Long-Term Debt to Net Assets	1.71	1.39	0.56	Long-Term Debt / Net Assets
	Net Assets to Total Assets	0.31	0.37	0.55	Net Assets / Total Assets
	Times Interest Earned	3.00	4.50	5.39	(Excess of Revenues over Expenses + Interest Expense) / Interest Expense
	Debt Service Coverage Ratio[1]			4.61	(Excess of Revenues over Expenses + Interest Expense + Depreciation Expense) /
					(Interest Expense + Principal Payments)
	[1] Annual principal payments are $000/year.

Pr 4-22

Pine Island Regional Hospital				Pine Island Regional Hospital				Pine Island Community Hospital					Pine Island Community Hospital					Pine Island Community Hospital
Statement of Activities (000's)				Balance Sheet (Horizontal Analysis) (000's)				Financial Ratios					Statement of Activities (Vertical Analysis) (000's)					Balance Sheet (Horizontal Analysis) (000's)
For Periods Ended 12/31/20X1 and 12/31/20X0				For Periods Ended 12/31/20X1 and 12/31/20X0				For Periods Ended 12/31/20X1 and 12/31/20X0					For Periods Ended 12/31/20X1 and 12/31/20X0					For Periods Ended 12/31/20X1 and 12/31/20X0
			Horizontal				Horizontal
			Analysis				Analysis		12/31/20X1	12/31/20X0	12/31/20X1 Formula	12/31/20X0 Formula			Vertical		Vertical			Vertical		Vertical
			% Change				% Change	Current Ratio	1.711	2.139	$11,250/ $6,575	$12,300/ $5,750		12/31/20X1	Analysis	12/31/20X0	Analysis	Assets	12/31/20X1	Analysis	12/31/20X0	Analysis
	12/31/20X1	12/31/20X0	20X0->20X1	Assets	12/31/20X1	12/31/20X0	20X0->20X1	Quick Ratio	1.551	1.957	($4,200+6,000)/$6,575	($4,750+6,500)/$5,750						Current Assets
				Current Assets				Acid Test Ratio	0.639	0.826	$4,200/$6,575	$4,750/$5,750	Net Patient Service Revenue	$55,000	87%	$62,000	85%	Cash and Cash Equivalents	$4,200	11%	$4,750	10%
Net Patient Service Revenue	$55,000	$62,000	-11%	Cash and Cash Equivalents	$4,200	$4,750	-12%	Days in Accounts Receivable	39.818	38.266	$6,000/$150.68493	$6,500/$169.86301	Net Assets Released from Restriction	5,000	8%	4,000	5%	Net Patient Receivables	6,000	16%	6,500	13%
Net Assets Released from Restriction	5,000	4,000	25%	Net Patient Receivables	6,000	6,500	-8%	(revenues per day)	150.685	169.863	$55,000/365	$62,000/365	Other Operating Revenue	3,000	5%	7,000	10%	Inventory	300	1%	250	1%
Other Operating Revenue	3,000	7,000	-57%	Inventory	300	250	20%						Total Revenues	63,000	100%	73,000	100%	Prepaid Expenses	750	2%	800	2%
Total Revenues	63,000	73,000	-14%	Prepaid Expenses	750	800	-6%	Average Payment Period	47.998	38.866	$6,575/$136.98630	$5,750/$147.94521						Total Current Assets	11,250	29%	12,300	25%
				Total Current Assets	11,250	12,300	-9%	(operating expenses-depreciation expense)/365	136.986	147.945	($55,000-$5,000)/365	($59,000-$5,000)/365	Expenses
Expenses								Days Cash on Hand	30.660	32.106	$4,200/$136.98630	$4,750/$147.94521	Nursing Services	20,000	32%	25,000	34%	Property, Plant and Equipment
Nursing Services	20,000	25,000	-20%	Property, Plant and Equipment									Administrative Services	18,000	29%	22,000	30%	Gross Property, Plant and Equipment	55,000	144%	60,000	123%
Administrative Services	18,000	22,000	-18%	Gross Property, Plant and Equipment	55,000	60,000	-8%	Fixed Asset Turnover	2.520	2.086	$63,000/ $25,000	$73,000/$35,000	Depreciation	5,000	8%	5,000	7%	(less Accumulated Depreciation)	30,000	78%	25,000	51%
Depreciation	5,000	5,000	0%	(less Accumulated Depreciation)	30,000	25,000	20%	Total Asset Turnover	1.647	1.496	$63,000/ $38,250	$73,000/$48,800	Interest	4,000	6%	4,000	5%	Net Property, Plant and Equipment	25,000	65%	35,000	72%
Interest	4,000	4,000	0%	Net Property, Plant and Equipment	25,000	35,000	-29%	Age of Plant	6.000	5.000	$30,000/$5,000	$25,000/$5,000	General Services	8,000	13%	3,000	4%
General Services	8,000	3,000	167%										Total Expenses	55,000	87%	59,000	81%	Long-Term Investments	2,000	5%	1,500	3%
Total Expenses	55,000	59,000	-7%	Long-Term Investments	2,000	1,500	33%	Operating Margin	0.127	0.192	$8,000/$63,000	$14,000/$73,000						Total Assets	$38,250	100%	$48,800	100%
				Total Assets	$38,250	$48,800	-22%	Return on Assets	0.209	0.287	$8,000/$38,250	$14,000/$48,800	Operating Income	8,000	13%	14,000	19%
Operating Income	8,000	14,000	-43%					Return on Equity	0.685	0.776	$8,000/$11,675	$14,000/$18,050	Excess of Revenues over Expenses	8,000	13%	14,000	19%
Excess of Revenues over Expenses	8,000	14,000	-43%	Liabilities and Net Assets				Non-Operating Revenue Ratio	0.079	0.055	$5,000/$63,000	$4,000/$73,000						Liabilities and Net Assets
				Current Liabilities				Long-Term Debt to Equity (Net Assets)	1.713	1.385	$20,000/$11,675	$25,000/$18,050	Increase (Decrease) in Net Assets	$8,000	13%	$14,000	19%	Current Liabilities
Increase (Decrease) in Net Assets	$8,000	$14,000	-43%	Accounts Payable	$5,500	$4,800	15%	Equity (Net Assets) to Total Assets	0.305	0.370	$11,675/$38,250	$18,050/$48,800						Accounts Payable	$5,500	14%	$4,800	10%
				Salaries Payable	1,075	950	13%	Debt Service Coverage Ratio	3.400	4.600	($8,000+5,000+4,000)/$5,000	($14,000+5,000+4,000)/$5,000						Salaries Payable	1,075	3%	950	2%
				Total Current Liabilities	6,575	5,750	14%	Times Interest Earned	3.000	4.500	($8,000+4,000)/$4,000	($14,000+4,000)/$4,000						Total Current Liabilities	6,575	17%	5,750	12%

				Long-Term Liabilities														Long-Term Liabilities
				Bonds Payable	20,000	25,000	-20%											Bonds Payable	20,000	52%	25,000	51%
				Total Long-Term Liabilities	20,000	25,000	-20%											Total Long-Term Liabilities	20,000	52%	25,000	51%

				Net Assets	11,675	18,050	-35%											Net Assets	11,675	31%	18,050	37%

				Total Liabilities and Net Assets	$38,250	$48,800	-22%											Total Liabilities and Net Assets	$38,250	100%	$48,800	100%

Pr 4.23a

Problem 4.23a Rocky Mountain Resort Hospital

	Rocky Mountain Resort Hospital
	Balance Sheet (Horizontal and Vertical Analyses) (in 000's)
	For the Years Ended 12/31/20X1 and 12/31/20X0
			% Total		% Total	% Change
		12/31/20X1	Assets	12/31/20X0	Assets	20X0-20X1
	Current Assets:
	Cash and Cash Equivalents	$3,800	5%	$8,750	14%	-57%
	Net Patient Receivables	15,000	20%	11,500	19%	30%
	Inventory	2,300	3%	1,250	2%	84%
	Prepaid Expenses	5,500	7%	4,500	7%	22%
	Total Current Assets	26,600	36%	26,000	42%	2%

	Plant, Property, & Equipment
	Gross Plant, Property, & Equipment	65,000	88%	40,000	65%	63%
	(less Accumulated Depreciation)	(20,000)	-27%	(15,000)	-24%	33%
	Net Property, Plant and Equipment	45,000	61%	25,000	41%	80%

	Long-Term Investments	2,000	3%	10,500	17%	-81%

	Total Assets	$73,600	100%	$61,500	100%	20%


	Current Liabilities:
	Accounts Payable	$8,500	12%	$3,800	6%	124%
	Salaries Payable	950	1%	700	1%	36%
	Total Current Liabilities	9,450	13%	4,500	7%	110%

	Long-Term Liabilities:
	Bonds Payable	40,000	54%	5,000	8%	700%
	Total Long-Term Liabilities	40,000	54%	5,000	8%	700%

	Net Assets	24,150	33%	52,000	85%	-54%

	Total Liabilities and Net Assets	$73,600	100%	$61,500	100%	20%

Pr 4.23b

Problem 4.23b Rocky Mountain Resort Hospital

	Rocky Mountain Resort Hospital
	Statement of Operations (Horizontal and Vertical Analyses) (in 000's)
	For the Years Ended 12/31/20X1 and 12/31/20X0
			% of Total		% of Total	% Change
		12/31/20X1	Revenues	12/31/20X0	Revenues	20X0-20X1
	Revenues:
	Net Patient Service Revenue	$45,000	67%	$30,000	65%	50%
	Net Assets Released from Restriction	12,000	18%	9,000	20%	33%
	Other Operating Revenue	10,000	15%	7,000	15%	43%
	Total Revenues	67,000	100%	46,000	100%	46%

	Expenses:
	Nursing Services	33,000	49%	31,000	67%	6%
	Administrative Services	13,000	19%	8,000	17%	63%
	Depreciation Expense	8,000	12%	4,000	9%	100%
	Interest Expense	4,000	6%	500	1%	700%
	General Services	5,000	7%	4,000	9%	25%
	Total Expenses	63,000	94%	47,500	103%	33%

	Operating Income	4,000	6%	(1,500)	-3%	-367%

	Excess of Revenues over Expenses	4,000	6%	(1,500)	-3%	-367%

	Increase (Decrease) in Net Assets	$4,000	6%	($1,500)	-3%	-367%

Pr 4.23c

Problem 4.23c Rocky Mountain Resort Hospital

	Ratio	20X1	20X0	Standard	Formula

	Liquidity Ratios
	Current Ratio	2.81	5.78	2.18	Current Assets / Current Liabilities
	Quick Ratio	1.99	4.50	1.76	(Cash + Marketable Securities + Net Receivables) / Current Liabilities
	Acid Test Ratio	0.40	1.94	0.35	(Cash + Marketable Securities) / Current Liabilities
	Days in Accounts Receivable	122	140	67	Net Patient Accounts Receivables / (Net Patient Revenues / 365)
	Days Cash on Hand	25	73	46	(Cash + Marketable Securities) / ((Operating Expenses - Depreciation Expense) / 365)
	Average Payment Period (Days)	63	38	54	Current Liabilities / ((Operating Expenses - Depreciation Expense) / 365)

	Profitability Ratios
	Operating Margin	0.06	(0.03)	0.02	Operating Income / Total Operating Revenues
	Non-operating Revenue	0.18	0.20	0.05	Non-operating Revenues and Other Income / Total Operating Revenues
	Return on Total Assets	0.05	(0.02)	0.03	Excess of Revenues over Expenses / Total Assets
	Return on Net Assets	0.17	(0.03)	0.06	Excess of Revenues over Expenses / Net Assets

	Activity Ratios
	Total Asset Turnover Ratio	0.91	0.75	1.02	Total Revenues / Total Assets
	Fixed Asset Turnover Ratio	1.49	1.84	3.59	Total Revenues / Net Plant and Equipment
	Age of Plant	2.50	3.75	9.86	Accumulated Depreciation / Depreciation Expense

	Capital Structure Ratios
	Long-Term Debt to Net Assets	1.66	0.10	0.21	Long-Term Debt / Net Assets
	Net Assets to Total Assets	0.33	0.85	0.62	Net Assets / Total Assets
	Times Interest Earned	2.00	(2.00)	2.85	(Excess of Revenues over Expenses + Interest Expense) / Interest Expense
	Debt Service Coverage Ratio[1]	3.56	1.67	3.35	(Excess of Revenues over Expenses + Interest Expense + Depreciation Expense) /
					(Interest Expense + Principal Payments)

	[1] 20X0: Total debt payments = $1,800, Interest Expense = $500; therefore, principal payment = $1,300
	20X1: Total debt payments = $4,500, Interest Expense = $4,000; therefore, principal payment = $500

	After having nearly been delivered a knockout punch, Rocky has come back strong.

Pr 4.24a

Problem 4.24a Williamson Academic Medical Center

	Williamson Academic Medical Center
	Balance Sheet (Horizontal and Vertical Analyses) (in '000)
	For the Years Ended December 31, 20X0 and 20X1
			% Total		% Total	% Change
		12/31/20X1	Assets	12/31/20X0	Assets	20X0-20X1
	Current Assets:
	Cash & Cash Equivalents	$1,000	5%	$800	4%	25%
	Patient Accounts Receivables, Net	4,500	21%	5,500	24%	-18%
	Inventories	2,000	9%	1,800	8%	11%
	Other Current Assets	100	0%	80	0%	25%
	Total Current Assets	7,600	36%	8,180	36%	-7%

	Plant, Property, & Equipment
	Gross Plant, Property, & Equipment	18,000	85%	18,500	82%	-3%
	(less Accumulated Depreciation)	(6,500)	-31%	(5,500)	-24%	18%
	Net Property, Plant and Equipment	11,500	55%	13,000	57%	-12%

	Long-Term Investments	2,000	9%	1,500	7%	33%

	Total Assets	$21,100	100%	$22,680	100%	-7%


	Current Liabilities:
	Accounts Payable	$4,000	19%	$4,200	19%	-5%
	Salaries Payable	30	0%	25	0%	20%
	Notes payable	250	1%	300	1%	-17%
	Other Current Liabilities	0	0%	0	0%	N/A
	Total Current Liabilities	4,280	20%	4,525	20%	-5%

	Non-Current Liabilities:
	Bonds Payable	10,000	47%	12,000	53%	-17%
	Total Non-Current Liabilities	10,000	47%	12,000	53%	-17%

	Net Assets	6,820	32%	6,155	27%	11%

	Total Liabilities and Net Assets	$21,100	100%	$22,680	100%	-7%

Pr 4.24b

Problem 4.24b Williamson Academic Medical Center

	Williamson Academic Medical Center
	Income Statement (Horizontal and Vertical Analyses) (in '000)
	For the Years Ended December 31, 20X0 and 20X1
			% of Total		% of Total	% Change
		12/31/20X1	Revenues	12/31/20X0	Revenues	20X0-20X1
	Revenues:
	Net Patient Revenues	$20,000	89%	$17,000	89%	18%
	Other Operating Revenues	2,500	11%	2,000	11%	25%
	Total Revenues	22,500	100%	19,000	100%	18%

	Expenses:
	Nursing Services	8,000	36%	7,000	37%	14%
	Administrative Services	4,000	18%	3,500	18%	14%
	(includes bad debt expense of $100,000)
	Depreciation	500	2%	500	3%	0%
	General Services	2,500	11%	2,500	13%	0%
	Fiscal Services	400	2%	400	2%	0%
	Professional/Ancillary Services	3,500	16%	3,000	16%	17%
	Interest	1,000	4%	1,000	5%	0%
	Total Expenses	19,900	88%	17,900	94%	11%

	Income from Operations	2,600	12%	1,100	6%	136%
	Non-Operating Income:
	Investment Income + Contributions	400	2%	2,000	11%	-80%

	Excess of Revenues over Expenses	3,000	13%	3,100	16%	-3%

	Increase (Decrease) in Net Assets	$3,000	13%	$3,100	16%	-3%

Pr 4.24c

Problem 4.24c Williamson Academic Medical Center

	Ratio	20X1	20X0	Standard	Formula

	Liquidity Ratios
	Current Ratio	1.78	1.81	1.84	Current Assets / Current Liabilities
	Quick Ratio	1.29	1.39	1.48	(Cash + Marketable Securities + Net Receivables) / Current Liabilities
	Acid Test Ratio	0.23	0.18	0.11	(Cash + Marketable Securities) / Current Liabilities
	Days in Accounts Receivable	82	118	68	Net Patient Accounts Receivables / (Net Patient Revenues / 365)
	Days Cash on Hand	19	17	45	(Cash + Marketable Securities) / ((Operating Expenses - Depreciation Expense) / 365)
	Average Payment Period (Days)	81	95	67	Current Liabilities / ((Operating Expenses - Depreciation Expense) / 365)

	Profitability Ratios
	Operating Margin	0.116	0.058	0.037	Operating Income / Total Operating Revenues
	Non-operating Revenue	0.018	0.105	0.087	Non-operating Revenues and Other Income / Total Operating Revenues
	Return on Total Assets	0.142	0.137	0.040	Excess of Revenues over Expenses / Total Assets
	Return on Net Assets	0.440	0.504	0.095	Excess of Revenues over Expenses / Net Assets

	Activity Ratios
	Total Asset Turnover Ratio	1.07	0.84	0.81	Total Revenues / Total Assets
	Fixed Asset Turnover Ratio	1.96	1.46	3.62	Total Revenues / Net Plant and Equipment
	Age of Plant	13.00	11.00	9.74	Accumulated Depreciation / Depreciation Expense

	Capital Structure Ratios
	Long-Term Debt to Net Assets	1.47	1.95	0.64	Long-Term Debt / Net Assets
	Net Assets to Total Assets	0.32	0.27	0.52	Net Assets / Total Assets
	Times Interest Earned	4.00	4.10	4.31	(Excess of Revenues over Expenses + Interest Expense) / Interest Expense
	Debt Service Coverage Ratio[1]	3.00	3.07	5.59	(Excess of Revenues over Expenses + Interest Expense + Depreciation Expense) /
					(Interest Expense + Principal Payments)
	[1] Annual principal payments are $500,000/year.

	Williamson's liquidity looks good: its ability to pay current debt has remained fairly constant and near the norm, but it is
	collecting and paying off debts faster than before. Except for non-operating revenue, which represents only a small
	portion of total revenues, the institution is quite profitable and is getting a healthy return on investments.

	One problem lies in the area of fixed assets: they are not being used as effectively as they could, and they are
	getting old. Unfortunately, Williamson is already more highly leveraged than are its peers, which suggests potential
	difficulties trying to borrow sufficient additional funds to replace aging equipment.

Template

Template Newport's Ratios for 20X0 and 20X1

	Year	Current Ratio	=	Current Assets	/	Current Liabilities
	20X1	0.00	=	$0	/	$0
	20X0	0.00	=	$0	/	$0
	Standard = 2.18

				(Cash +		Net Accounts		Current
	Year	Quick Ratio	=	Marketable Securities	+	Receivable)	/	Liabilities
	20X1	0.00	=	$0	+	$0	/	$0
	20X0	0.00	=	$0	+	$0	/	$0
	Standard = 1.76

		Acid Test		(Cash +		Current
	Year	Ratio	=	Marketable Securities	/	Liabilities
	20X1	0.00	=	$0	/	$0
	20X0	0.00	=	$0	/	$0
	Standard = 0.35

RatioIndustry

Median

Current ratio 1.98

Days in accts receivable 67.19

Total asset turnover 1.02

Fixed asset turnover 2.20

Operating margin 0.02

Return on total assets 0.04

Long-term debt to net assets 0.62

Wynn Memorial Nursing Home

Financial Ratio Analysis

For the Year 2008 and 2009