Assignment 1 (OMHA 6175)- Ratio Analysis
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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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