5 Part Answer
Mardy87Instructions are attached.
Please use the attached template
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files (3)DrsSmithandBrownFinancialStatement1.docx
Week4.3.docx
HCA312Week4_FinancialandOperatingRatiosTemplate10-2021.docx
DrsSmithandBrownFinancialStatement1.docx
Drs. Smith and Brown
Statement of Net Income for the Three Months
Ended March 31, 20__
Revenue
Net patient revenue 180,000
Other revenue 0
Total Operating Revenue 180,000
Expenses
Nursing/PA salaries 16,650
Clerical salaries 10,150
Payroll taxes/employee benefits 4,800
Medical supplies and drugs 15,000
Professional fees 3,000
Dues and publications 2,400
Janitorial service 1,200
Office supplies 1,500
Repairs and maintenance 1,200
Utilities and telephone 6,000
Depreciation 30,000
Interest 3,100
Other 5,000
Total Expense 100,000
Income from Operations 80,000
Nonoperating Gains (Losses) 0
Nonoperating Gains (Net) 0
Net Income 80,000
Drs. Smith and Brown
Balance Sheet
March 31, 20__
Assets
Current Assets
Cash and Cash Equivalents 25,000
Patient accounts receivable 40,000
Inventories—supplies and drugs 5,000
Total Current Assets 70,000
Property, Plant, and Equipment
Buildings and Improvements 500,000
Equipment 800,000
Total 1,300,000
Less Accumulated Depreciation (480,000)
Net Depreciable Assets 820,000
Land 100,000
Property, Plant, and Equipment, Net 920,000
Other Assets 10,000
Total Assets 1,000,000
Liabilities and Capital
Current Liabilities
Current maturities of long-term debt 10,000
Accounts payable and accrued expenses 20,000
Total Current Liabilities 30,000
Long-term Debt 180,000
Less Current Portion of Long-Term Debt (10,000)
Net Long-Term Debt 170,000
Total Liabilities 200,000
Capital 300,000
Total Liabilities and Capital 1,000,000
Week4.3.docx
download the Financial and Operating Ratios Assignment template Download Financial and Operating Ratios Assignment template. You will be responsible for entering your responses directly into the template provided. You will need to ensure that your responses are thorough, examples are given where indicated, and references are listed in APA format in the space provided within the template. In the assignment template provided, complete Parts 1 through 5.
Part 1: Calculations of Financial Ratios
· Calculate the financial ratios for Dr. Smith and Brown’s physician practice to analyze the financial viability of the organization.
· Identify the type of ratio for each of the following:
· Current ratio
· Quick ratio
· Debt Service Coverage ratio (DSCR)
· Operating Margin
· Return on Total Assets (ROTA)
Part 2: Type of Ratios
· Define the type of ratios used in determining the financial viability of an organization.
· Liquidity
· Solvency
· Profitability
Part 3: Operating Ratios
· Define the financial ratios utilized to determine the financial status of Dr. Smith and Brown’s physician practice.
· Compare the results in Part 1 with the median to determine the value associated with the financial ratio.
· Analyze the results calculated in Part 1 and explain what the calculated result tells you about the financial health of Dr. Smith and Dr. Brown’s physician practice
Part 4: Capital Budgeting Expenditures – Time Value of Money Calculations
· Calculate each of the operational ratios for Dr. Smith and Dr. Brown’s physician practice.
· Present Value
· Internal Rate of Return
Part 5: Evaluation of Capital Expenditures
· Define the time value of money.
· Provide a real-world example for the time value of money.
· Explain why time is an important factor when considering a capital expenditure.
· After review of the Dr. Smith and Dr. Brown’s financial statements Download Dr. Smith and Dr. Brown’s financial statements and ratios, analyze the feasibility that the Capital Expenditure listed above would benefit Dr. Smith and Dr. Brown’s practice. Explain your rationale on whether you would recommend the purchase of the capital expenditures identified. Include any positive or negative aspects of regulatory or government mandates that were considered in making the decision to purchase the capital expenditures.
HCA312Week4_FinancialandOperatingRatiosTemplate10-2021.docx
Page 7 of 7
HCA 312 - WEEK 4 ASSIGNMENT
ENTER YOUR NAME IN THE BOX ABOVE
FINANCIAL AND OPERATING RATIOS
INSTRUCTIONS: Review Chapters 11, 12 from earlier weeks in class. Read this week’s assigned chapters, 13, 14 & 15, before completing the template. In addition, you will utilize the Ratio Benchmark & Median Table below as well as the textbook appendices 13A, and 13C to complete the operating ratio calculations. As the Practice Manager, you will be utilizing Dr. Smith and Dr. Brown’s Physician Practice financial statements for completing the financial ratio calculations below to determine the feasibility of a capital expenditure. Refer to the Week 4 Assignment directions within the course to understand what is expected in each part of the table below. Thorough explanations and definitions for each section are required. If you include enough detail for each section, the template document will be at least seven pages in length. Include APA citations within the Response Column where appropriate. List your references in APA format on the last row of this template. All citations and references must be in APA style according to the Writing Center guidelines. Once you complete the template, upload the document to the Week 4 Assignment section of the course.
Use the Ratio Benchmark and Median Table below in Part 3 for your analysis on Dr. Smith and Dr. Brown’s financial health status.
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RATIO BENCHMARK AND MEDIAN TABLE |
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Ratio |
Benchmark - 50th Percentile) for Comparable Physician Group Practices |
Median for Comparable Physician Group Practices |
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Current Ratio |
*2.2 |
2 |
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Quick Ratio |
*1.74 |
1 |
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Debt Service Coverage Ratio |
*1.49 |
1.1 |
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Operating Margin |
*4.45 |
2.6 |
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Return on Total Assets |
*4.04% |
4.05% |
*Benchmark Data: 50th Percentile Information extrapolated from Appendix 33B Case Study.
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PART 1: CALCULATION of FINANCIAL RATIOS: |
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Below are five financial ratios. In each of the columns, you will be responsible for showing the calculation for each based off Dr. Smith and Brown’s financial statements (located with the textbook). You will need to identify the type of ratio as well. Choices for the type of ratio are: LIQUIDITY, SOLVENCY, PROFITABILITY or N/A. |
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EXAMPLE for the INVENTORY TURNOVER RATIO: Show Calculation: 180,000/5000 = 36 Identify the type of ratio: n/a |
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CURRENT RATIO |
QUICK RATIO |
DEBT SERVICE COVERAGE RATIO |
OPERATING MARGIN |
RETURN ON TOTAL ASSETS |
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Show calculation in the box provided:
Identify the type of ratio:
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Show calculation in the box provided:
Identify the type of ratio:
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Show calculation: (For this ratio, the denominator you will use is 22,200)
Identify the type of ratio:
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Show calculation in the box provided:
Identify the type of ratio:
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Show calculation in the box provided:
Identify the type of ratio:
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PART 2: TYPE OF RATIOS |
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In your own words, define the meaning of each ratio: liquidity, solvency, and profitability. |
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Liquidity |
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Solvency |
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Profitability |
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PART 3: OPERATING RATIOS |
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Define the financial ratios listed below. Next, analyze the result for each ratio calculated above and explain what the calculated result tells you about the financial health of Dr. Smith and Dr. Brown’s physician practice |
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EXAMPLE:
INVENTORY TURNOVER RATIO |
DEFINE: Inventory turnover is calculated to determine how quickly the inventory is used based on the services rendered. If the inventory turnover is high, this means the hospital does not have enough inventories on hand to accommodate the patient load. ANALYSIS: For this example, the hospital is turning over their inventory 36 times per year, which is about 3 times a month. The opposite is true if the inventory turnover calculation is lower than the median. FINANCIAL HEALTH: This could mean that there is a build-up of inventory due to lower than expected patient revenues. |
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1) CURRENT RATIO
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2) QUICK RATIO |
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3) DEBT SERVICE COVERAGE RATIO
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4) OPERATING MARGIN |
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5) RETURN ON TOTAL ASSETS |
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PART 4: CAPITAL BUDGET EXPENDITURES - TIME VALUE OF MONEY CALCULATIONS |
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Complete the tables below by computing the following time value of money calculations: Present Value, Internal Rate of Return, and Pay Back Period for the capital expenditures for Dr. Smith and Brown’s physician practice. Enter the result of the calculation into the blank cells. |
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PRESENT VALUE |
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CE/Amount |
Compounding Period |
Rate of Interest |
Present Value |
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Laboratory: $70,000 |
Annual |
4% for 15 years |
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EMR Software: $125,000 |
Annual |
6% for 10 years |
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INTERNAL RATE OF RETURN |
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Initial cost of Investment |
Periods of Useful life |
Estimated annual net cash inflow generated |
Look-up table value |
Rate of Interest |
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e-prescribing software: $ 75,000 |
10 |
$10,190 |
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Lab equipment: $ 58,000 |
6 |
$14,108 |
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PART 5: EVALUATION OF CAPITAL BUDGET EXPENDITURES |
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As a Health Care Manager, you will be responsible for operational decisions by applying financial management principals. For Part 5, you will apply the concepts of the Time Value of Money to define, analyze, and rationalize your findings from the Financial and Operation ratio results to make informed decisions regarding capital expenditures for Dr. Smith and Brown’s physician practice. Include any government or regulatory mandate information that you considered when making your decision. Complete each of the cells below. |
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Define the time value of money. |
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Provide a real-world example for the time value of money. |
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Why is time such an important factor when considering a capital expenditure? |
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After review of the financial statements and ratios, analyze the feasibility that the EMR Capital Expenditure listed above would benefit Dr. Smith and Dr. Brown’s practice. Explain your rationale on whether you would recommend the purchase of the capital expenditures identified. Include any positive or negative aspects of regulatory or government mandates that were considered in making the decision to purchase the capital expenditures. |
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REFERENCES |
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List the references you used to complete this assignment. You must format the references in APA format as outlined in 7th edition guidelines found at the Writing Center. |
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