Using Microsoft Excel, calculate the hospital's Collection Period ratio, Average Collection Period ratio, Operating Margin ratio, Inventory Turnover Ratio using the Balance Sheet and Statement of Operations provided.

Compare our hospital's ratio numbers to the most recent Optum Median hospital numbers (provided). For each ratio, is our hospital better or worse than the median hospital? Lastly, explain what purpose is served by conducting the ratio analysis and comparing your results to the industry average?

Optum 2021 Median Hospital Financial Ratios

• Average Collection Period 5
• Operating Margin 46%
• Inventory Turnover Ratio 53

Details: Use Excel or Word to organize your answers. Formulas for the required ratios are as follows:

Collection Period Ratio

 

Operating Margin

 

Inventory Turnover Ratio

 

Organize your table like the one in the example below, calculate your ratios and place your answers in the Current Ratio column, and state whether your hospital ratio is better than the Optum 2021 Median ratio.

Transcribed Image Text:

BALANCE SHEET ASSETS Current Assets Cash Temporary investments Receivables, net Inventory Prepaid expenses Total current assets Noncurrent assets Land, plant, and equipment Less accumulated deprecitaion Plant and equipment, net Long-term investments 2020 $124 $45 $3,536 $175 $32 $3,912 $6,980 $1,730 $5,250 $609 Other non-currentassets $113 Total noncurrent assets $5,972 Total assets $9,884 LIABILITIES AND NET ASSETS Current liabilities Accounts payable Notes payable Accrued expenses payable Deferred revenues Estimated third-party adjustments Current portion of long-term debt Total current liabilities $302 $345 $871 $10 $137 $184 $1,849 Noncurrent liabilities Long-term debt, net of current portion $3,600 Total liabilities $5,449 NET ASSETS Unrestricted net assets Restricted net assets Total net assets Total liabilities and net assets. $3,283 $1,152 $4,435 $9.884 BALANCE SHEET ASSETS Current Assets Cash Temporary investments Receivables, net Inventory Prepaid expenses Total current assets Noncurrent assets Land, plant, and equipment Less accumulated deprecitaion Plant and equipment, net Long-term investments 2020 $124 $45 $3,536 $175 $32 $3,912 $6,980 $1,730 $5,250 $609 Other non-currentassets $113 Total noncurrent assets $5,972 Total assets $9,884 LIABILITIES AND NET ASSETS Current liabilities Accounts payable Notes payable Accrued expenses payable Deferred revenues Estimated third-party adjustments Current portion of long-term debt Total current liabilities $302 $345 $871 $10 $137 $184 $1,849 Noncurrent liabilities Long-term debt, net of current portion $3,600 Total liabilities $5,449 NET ASSETS Unrestricted net assets Restricted net assets Total net assets Total liabilities and net assets. $3,283 $1,152 $4,435 $9.884