Healthcare Corporate Planning

BAPTIST HEALTH RATIOS ANALYSIS 1

BAPTIST HEALTH RATIOS ANALYSIS 7

Baptist Health Ratios Analysis

Name

Institutional Affiliation

Four major Health Care Financial Analysis ratios

Healthcare financial ratios can be classified under four major types: Liquidity ratios, activity ratios, capital structure and profitability ratios.

Liquidity ratios include current ratio, replacement viability, average payment period, acid test ratio, day revenue in net accounts receivable, day cash on hand, acid test ratio and the quick ratio. Liquidity ratios help evaluate the healthcare’s ability to pay its current obligations (Tracy, 2012).

Activity ratio include total asset turnover ratio, current asset turnover ratio and fixed asset turnover ratio. Activity ratios help determine on how efficient an organization is using its financial assets to create revenue for itself (Gary Porter, 2008).

Profitability ratio include operating margin, total margin, return on assets, non-operating revenue, and return on investment. profitability ratios help evaluate the performance of the health care organization on if they are generating enough returns compared to the returns of the market and or other similar healthcare institutions.

Capital structure ratio include equity financing, total debt to total assets, debt service coverage ratio, long term debt to equity, cash flow to total debt, long term debt to total asset, fixed asset financing ratio and long-term debt to capitalization (Francis, 2009). Capital structure ratio help show on how much the healthcare facility relies on debt financing to run its operation.

Baptist healthcare financial ratios

Current ratio=Total Current Assets/Total current liabilities=$670376084 /$749510668 =0.894

Baptist healthcare has more current liabilities compared to its current assets meaning that the company does not have enough to pay for its short term obligations.

Collection period ratio

=Net receivables/ (Net patient service revenue/365) =$321,410,129/$3,325,540,754/365 =35.28

Baptist Healthcare once it has made sales on credit takes approximately 35.28 days to collect the receivables.

Day cash on hand, all sources, ratio,

= (Cash+ Temporary investments +unrestricted long term investments)/ ((Total expenses-depreciation expenses)/365)

= ($146,779,645+ 50,335,043+126,824,705)/((93,023,123,857-56,267,588)/365 )= 1.27

Baptist health care facility can run for 1.27 days of operating expenses with its current cash and unrestricted long term investments available.

Day cash on hand, short term source, ratio=

= (Cash+ Temporal investments) / (Total Expenses-depreciation expense)/365) =($146,779,645+ 50,335,043)/((93,023,123,857-56,267,588)/365) =0.774

Baptist health care facility can run for 0.774 days of operating expenses with its current cash available

Average payment period ratio

=Total Current liabilities/(Total expenses-depreciation expense)/365) =$749510668/(93,023,123,857-56,267,588)/365

=3

Baptist health care facility takes 3 days to pay for any purchase made on credit.

Operating margin ratio

=(Operating income/total operating revenue) *100= (38,047,989/96,786,034) *100= -39.31%

The health care facility makes a loss of 39.31% after paying for variable costs of production.

Total margin ratio = (Excess of revenues over expenses/Total operating revenue) *100

= (427,935,694/96,786,034)*100=442.14 .%

Baptist Healthcare earned 442.14 % percent of total (gross)income of its total revenues (net income).

Return on net assets ratio

= (Excess of revenues over expenses/total net assets) *100 = (427,935,694/3,901,846,192) *100

= 10.97%

The company is using its fixed assets and net working capital with a level of 10.97 % efficiency. The higher the rate of efficiency, the better the rate of generating net income.

Total assets turnover ratio

= (total operating revenue +Other incomes)/total assets =(2,985,075,868+465,983,683)/ 6,263,907,136 =0.55

Baptist healthcare facility gets 0.55 as sales for every dollar of the company’s net assets.

Age of plant ratio

= Accumulated depreciation/depreciation expense = 1,546,027,578 /194,212,896 =7.96

The HealthCare’s plant and equipment is approximately 7.94 years

Fixed Asset turnover ratio

=(Total Operating revenue+ Other incomes)/Net fixed Assets = (2,985,075,868+465,983,683)/ 2,203,975,074 =1.56

The healthcare facility is generating $1.56 revenue out of its fixed assets out of every dollar of investment in net fixed assets.

Current asset turnover ratio

= (Total Operating revenue + Other incomes) /Total current Assets =(2,985,075,868+465,983,683) / 670,376,084

=5.42

Current assets were turned over to sales 5.42 times. The higher the ratio, the better the financial operations of Baptist healthcare facility.

Inventory ratio

= (Total Operating revenue+ Other incomes)/Inventory = (2,985,075,868+465,983,683) / ($49,768,000+$41,586,000)/2 =75.56

Average inventory is used because stock often fluctuates a lot in any organization.

Net asset financing ratio

= Total Net assets/total assets*100= 3,901,846,192/$6,263,907,136 *100 =62.29%

Long term Debt capitalization ratio

=(Long term debt/( Long term debt +Net assets ))*100 =(1,355,783,124/(1,355,783,124+3,901,846,192)*100

=26%

Baptist healthcare facility has 26% of its finances funded by long term debt.

Debt service coverage ratio

= (Excess of revenues over expenses+ Interest expense+ depreciation)/ (Interest + Principle payments.)

= (427,935,694+56,267,588+194,212,896)/ (56,267,588+905,866,791) =0.7051.

Baptist healthcare facility can repay its debt service 0.7051 times with its operating income Capex

Cash flow to debt ratio

= (Excess of revenue over expenses+ depreciation)/ (Current Liabilities + Long term Debt) *100 = (427,935,694+194,212,896)/ (749,510,668+1,355,783,124) *100 =29.55%

Theoretically, Baptist healthcare facility will take 3.384 years (100%/29.55%) to pay off all its liabilities

Reference

Francis, J. (2009). Financial Accounting: An Introduction to Concepts, Methods and Uses. Cengage Learning. Gary Porter, C. N. (2008). Financial Accounting: The Impact on Decision Makers. Cengage Learning. Tracy, A. (2012). Ratio Analysis Fundamentals: How 17 Financial Ratios Can Allow You to Analyse Any Business on the Planet. Ratio Analysis.