Assignment 1 (OMHA 6175)- Ratio Analysis

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Florida Atlantic University *

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6175

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Finance

Date

Feb 20, 2024

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docx

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12

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Assignment 1: Ratio Analysis Directions: Please try your best on these answers.  These questions are meant to be challenging. However, these questions will prepare you well for the exam. I have created a PowerPoint as  guides to try to get you through these questions.  The numbers will be different but the processes the same. The answers and solutions will be shared after the assignment deadline. Even though these questions are multiple choice, please try to work out the math yourself because if you can understand this, you will have no problems with the math on the exam. For Questions #1-8, use the numbers provided for Jackson Hospital for 2019. These numbers are also in the Excel document provided (0.5 points each- You can highlight the right answers).
Cash Flows From Operating Activities Operating Income 6,474 $ Adjustments: Depreciation 4,130 $ Increase in Accounts Receivable (1,102) $ Increase in Inventories (195) $ Decrease in Accounts Payable (438) $ Increase in Accrued Expenses 229 $ Net Cash Flow from Operations 9,098 $ This is a formula Cash Flow From Investing Activities Investment in Property and Equipment (4,293) $ Investment in Short-Term Securities (2,000) $ Net Cash Flow from Investing (6,293) $ This is a formula Cash Flows From Financing Activities: Nonoperating Income 2,098 $ Repayment of Long-Term Debt (2,150) $ Repayment of Notes Payable (3,262) $ Capital Lease Principal Repayment (323) $ Net Cash Flow From Investing (3,637) $ This is a formula Net Increase (Decrease) in Cash and Equivalen (832) $ This is a formula Beginning Cash and Equivalents 3,095 $ Ending Cash and Equivalents 2,263 $ Jackson Hospital Year Ended As of December 31, 2019 Statement of Cash Flows
Revenues: 2019 Patient Service Revenue 95,398 $ Less: Provision for Bad Debts 3,469 $ Net Patient Service Revenue 91,929 $ This is a formula Premium Revenue 4,622 $ Other Revenue 6,014 $ Net Operating Revenues 102,565 $ This is a formula Expenses Nursing Services 56,752 $ Dietary Services 4,718 $ General Services 11,655 $ Administrative Services 11,585 $ Employee Health and Welfare 10,705 $ Malpractice Insurance 1,204 $ Depreciation 4,025 $ Interest Expense 1,521 $ Total Expenses 102,165 $ This is a formula Operating Income 400 $ This is a formula Non-operating Income 1,995 $ Net Income 2,395 $ This is a formula Year Ended As of December 31, 2019 Jackson Hospital Income Statement
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2019 Cash and Equivalents 3,095 $ Short-Term Investments 2,000 $ Net Patient Accounts Receivable 20,738 $ Inventories 2,982 $ Total Current Assets 28,815 $ This is a formula Gross Property and Equipment 140,865 $ Accumulated Depreciation 21,030 $ Net Property and Equipment 119,835 $ This is a formula Total Assets 148,650 $ This is a formula Accounts Payable 5,145 $ Accrued Expenses 5,421 $ Notes Payable 6,237 $ Total Current Liabilities 16,803 $ This is a formula Long-Term Debt 30,900 $ Capital Lease Obligations 2,155 $ Total Long-Term Liabilities 33,055 $ This is a formula Net Assets (Equity) 98,792 $ Total Liabilities and Net Assets 148,650 $ This is a formula Jackson Hospital As of December 31, 2019 Balance Sheet
#1. What is the Return on Assets Ratio for Jackson Hospital in 2019? Choice: 2.5% Choice: 3.2% Choice: 1.6% Choice: 1.0% $2,395/$148,650 = 0.016 or 1.6% #2. What is the Current Ratio for Jackson Hospital in 2019? Choice: 1.7 times Choice: 2.8 % Choice: 5.4 times Choice: 2.0 times $28,815/$16,803 = 1.7 times #3. What what is the Days Cash on Hand for Jackson Hospital in 2019? Choice: 24 days Choice: 18.9 days Choice: 9.18 days Choice: 12.1 days ($3,095+$2,000)/ ($102,165-$4,025)/365 $5,095/$98,140/365 $5,095/268.88 18.9 days #4. What is the Average Collection Period / Days in Accounts Receivable for Jackson Hospital in 2019? Choice: 78 days Choice: 48 days Choice: 82.3 days Choice: 19.1 times Days in Accounts Receivable = $20,738/ ($91,929/365) = $20,738/ $251.86 = 82.3 days #5. What is the Debt Ratio for Jackson Hospital in 2019? Choice: 100% Choice: 33.5% Choice: 0.0% Choice: 24.2% Total Debt = $16,803 + $33,055 = $49,858
Total Assets = $148,650 Debt Ratio = $49,858/$148,650 = 0.335 or 33.5% #6. What is the Debt to Equity Ratio for Jackson Hospital in 2019? Choice: 0.505 times Choice: 0.612 times Choice: 0.300 times Choice: 0.258 times Total Debt = $16,803 + $33,055 = $49,858 Total Equity = $98,792 Debt to Equity Ratio = $49,858/$98,792 = 0.505 or 51% #7. What is the Times Interest Earned Ratio for Jackson Hospital in 2019? Choice: 8.4 times Choice: 1.0 times Choice: 5.1 times Choice: 2.6 times EBIT = $2,395 + $1,521 = $3,916 Times Interest Earned Ratio = $3,916/$1,521 = 2.6 #8. What is the Fixed Assets Turnover Ratio for Jackson Hospital in 2019? Choice: 0.51 times Choice: 0.87 times Choice: 1.00 times Choice: 0.33 times Total Revenues = $102,565 + $1,995 = $104,560 Net Fixed Assets = $119,835 Fixed Asset Turnover = $104,560/$119,998 = 0.87
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For Questions #9-16, in the Excel document provided – use the numbers for Heart Hospital (0.5 points each- You can highlight the right answers). 2019 Current Assets Cash 14,202 $ Accounts Receivable, Net 5,918 $ Medical Supplies Inventory 1,211 $ Prepaid Expense and Other Current Assets 1,429 $ Total Current Assets 22,760 $ Property, Plant and Equipment, Net 33,769 $ Other Assets 901 $ Total Assets 57,430 $ Current Liabilities Accounts Payable 1,910 $ Accrued Compensation and Benefits 2,543 $ Other Accrued Liabilities 1,843 $ Current Portion of Long-Term Debt 2,064 $ Total Current Liabilities 8,360 $ Long-Term Debt 21,640 $ Total Liabilities 30,000 $ Owners' Equity 27,430 $ Total Liabilities and Owners' Equity 57,430 $ Balance Sheet The Heart Hospital As of September 30, 2019 (in thousands)
Revenues: Patient Service Revenue net of Discounts and Allowances 66,962 $ Provision for Bad Debt (2,457) $ Net Patient Service Revenue 64,505 $ Operating Expenses: Personnel Expense 21,707 $ Medical Supplies Expense 15,047 $ Other Operating Expense 9,721 $ Depreciation Expense 2,625 $ Interest Expense 1,322 $ Total Operating Expense 50,422 $ Income from Operations 14,083 $ Other Income: Interest and Other Income, Net 159 $ Total Other Income (Expenses), Net 159 $ Net Income 14,242 $ The Heart Hospital Statement of Operations Year Ended September, 30, 2019 (in thousands) #9. What is the Return on Assets Ratio for The Heart Hospital? Choice: 12.2% Choice: 24.8% Choice: 45.7% Choice: Not enough information provided $14,242/$57,430 = 0.248 or 24.8% #10. What is the Current Ratio for The Heart Hospital? Choice: 2.7 times Choice: 4.5 times Choice: 5.4 times Choice: 1.2 times $22,760/$8,360 = 2.7
#11. What is the Days Cash on Hand for The Heart Hospital? Choice: 108.4 days Choice: 120 days Choice: 88.1 days Choice: 98 days ($14,202)/ ($50,422-$2,625)/365 $14,202/$47,797/365 $14,202/$131.0 = 108.4 #12. What is the Average Collection Period/Days in Accounts Receivable for The Heart Hospital? Choice: 10.9 days Choice: 24.5 days Choice: 15.0 days Choice: 33.5 days Days in Accounts Receivable = $5,918/ ($64,505/365) = $5,918/ $176.7 = 33.5 days #13. What is the Debt Ratio for The Heart Hospital? Choice: 52.2% Choice: 63.4% Choice: 28.0% Choice: 45.6% Total Debt = $30,000 Total Assets = $57,430 Debt Ratio = $30,000/$57,430 = 0.522 or 52.2% #14. What is the Debt to Equity Ratio for The Heart Hospital? Choice: 2.05 times Choice: 1.09 times Choice: 5.1 times Choice: 0.79 times Total Debt = $30,000 Total Equity = $27,430 Debt to Equity Ratio = $30,000/$27,430 = 1.09
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#15. What is the Times Interest Earned Ratio for The Heart Hospital? Choice: 20.4% Choice: 7.9 times Choice: 11.77 times Choice: 13.0 times EBIT = $14,242 + $1,322 = $15,564 Times Interest Earned Ratio = $15,564/$1,322 = 11.77 #16. What is the Fixed Assets Turnover Ratio for The Heart Hospital? Choice: 2.6 times Choice: 1.9 times Choice: 4.5 times Choice: 0.08 times Total Revenues = $64,505 Net Fixed Assets = $33,769 Fixed Asset Turnover = $64,505/$33,769 = 1.9 Consider the following financial statements for Green Valley Nursing Home, Inc., a for-profit, long-term care facility (2 points):       Green Valley Nursing Home, Inc.   Statement of Income and Retained Earnings Year Ended December 31, 2XXX Revenue: Net patient service revenue $3,163,258 Other revenue $106,146 Total revenues $3,269,404 Expenses: Salaries and benefits $1,515,438 Medical supplies and drugs $966,781 Insurance and other $296,357 Rent $110,000 Depreciation $85,000 Interest $206,780 Total expenses $3,180,356 Operating income $89,048 Provision for income taxes $31,167 Net income $57,881
Retained earnings, beginning of year $199,961 Retained earnings, end of year $257,842           Balance Sheet Year Ended December 31, 2XXX Assets Current assets: Cash $105,737 Marketable securities $200,000 Net patient accounts receivable $215,600 Supplies $87,655 Total current assets $608,992 Property and equipment $2,250,000 Less accumulated depreciation $356,000 Net property and equipment $1,894,000 Total assets $2,502,992 Liabilities and Shareholders' Equity Current liabilities: Accounts payable $72,250 Accrued expenses $192,900 Notes payable $100,000
Current portion of long-term debt $80,000 Total current liabilities $445,150 Long-term debt $1,700,000 Shareholders' equity: Common stock, $10 par value $100,000 Retained earnings $257,842 Total shareholders' equity $357,842 Total liabilities and shareholders' equity $2,502,992 a. Perform a Du Pont analysis on Green Valley. Assume that the industry average ratios are as follows: Green Valley Industry average Total margin 3.5% Total asset turnover 1.5 Equity multiplier 2.5 Return on equity (ROE) 13.1% You must prepare a Du Pont analysis for the company and interpret the results (Calculations needed) 3.5 x 1.5 x 2.5 = 13.1% $ 57,881 $ 3,163,258 × $ 3,163,258 $ 2,502,992 × $ 2,502,992 $ 357,842 1 . 83 × 1.26 × 7.0 = 16.1%
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