1. How much would the Return on Equity in 2019 change based on the following?

a. The sale of vacant land results in a $2.0 million decrease in total assets. Net income wouldn't be impacted, and the Board wants to keep the debt ratio for 2019 as is.

b. When debt is used in place of equity, the debt ratio rises to 48 percent. Assets overall wouldn't be impacted. Although interest expense would rise, improved cost controls would balance out the higher interest expense, keeping net income constant.

c. When LEAN management is used, overall costs are reduced by $0.5 million. Total earnings, assets, liabilities, and net assets would all remain unchanged.

d. The Board is pressuring management to raise the return on equity to at least 10%, regardless of the method chosen. What overall margin would be required, keeping everything else constant, to achieve the 10% ROE?

2.What are your top three or four suggestions to the Board based on the scant facts supplied?

AutoSave OFF A A CG ... w- 2.6 - Saved to my Mac Q Home Insert Draw Design Layout References Mailings Review View Table Design Layout ? Tell me Comments Editing Share Calibri (Bo... v 12 A A Aa Ap AaBbCcDdEe AaBbCcDdEe AaBbCcDc AaBbCcDdEE AaBb( , Paste BIUvab X X|A DAY Norma No Spacing Heading 1 Heading 2 Title Styles Dictate Sensitivity Editor Pane Statements of Operations (Millions): Revenues 2016 2017 2018 Net patient service revenue $ 28.796 $ 30.57 $ 34.582 Other revenue 1.237 1.853 1.834 Total revenues $ 30.033 $ 32.429 $ 36.416 Expenses Salaries and wages $ 12.245 $ 12.468 $ 13.994 Fringe benefits 1.83 2.408 2.568 Interest expense 1.181 1.598 1.776 Depreciation 2.350 2.658 2.778 Medical supplies and drugs 0.622 .655 .776 Professional liability 0.140 0.201 0.218 Other 9.036 10.339 11.848 Total expenses $ 27.404 30.327 $ 33.958 Net income $ 2.629 $ 2.102 $ 2.458 Balance Sheets (Millions): Assets 2016 2017 2018 Cash and investments $ 4.673 $ 5.069 $ 2.795 Accounts receivable (net) 4.359 5.674 7.413 Inventories 0.432 0.523 0.601 Other current assets 0.308 0.703 0.923 Total current assets $ 9.772 11.969 $ 11.732 Gross plant and equipment $ 47.786 55.33 $ 59.552 Accumulated depreciation 11.820 14.338 17.009 Net plant and equipment $ 35.966 40.995 $ 42.543 Total assets $ 45.738 $ 52.964 $ 54.275 Liabilities and Net Assets Accounts payable $ 0.928 $ 1.253 1.760 Accruals 1.460 1.503 1.176 Current portion of long-term debt 0.110 1.341 1.465 Total current liabilities $ 2.498 $ 4.097 $ 4.401 Long-term debt $ 15.673 $ 19.222 $ 17.795 Net assets $ 27.567 $ 29.645 $ 32.079 Total liabilities and net assets $ 45.738 $ 52.964 $ 54.275 962 words x English (United States) Accessibility: Investigate Focus E + 99%AutoSave OFF A A CG ... w- 2.6 - Saved to my Mac Q Home Insert Draw Design Layout References Mailings Review View Table Design Layout ? Tell me Comments Editing Share Calibri (Bo... v 12 A A Aav A AaBbCcDdEe AaBbCcDdEe AaBbCcDc AaBbCcDdEE AaBb( , Paste BIUab X x A DAY Norma No Spacing Heading 1 Heading 2 Title Styles Dictate Sensitivity Editor Pane Statements of Cash Flows (Millions): Cash Flows from Operating Activities 2016 2017 Net income $ 2.102 $ 2.458 Depreciation 2.633 2.756 Change in accounts receivable (1.315) (1.739) Change in inventories 0.091) (0.078) Change in other current assets (0.395) (0.220) Change in accounts payable 0.325 0.507 Change in accruals 0.043 (0.327) Net cash flow from operations $ 3.302 $ 3.357 Cash Flows from Investing Activities Investment in plant and equipment $ (7.686) 5 (4.328) Cash Flows from Financing Activities Change in long-term debt $ 3.549 $ (1.427) Change in current portion of long-term debt 1.231 0.124 Net cash flow from financing $ 4.780 S (1.303) Net increase (decrease) in cash and investments $ 0.396 $ (2.274) Beginning cash and investments 4.673 5.069 Ending cash and investments 5.069 $ 2.795 Note: The depreciation and fixed asset acquisitions data in the statements of cash flows are somewhat different than they would be if calculated directly from the other financial statements because of asset revaluations. Operating Revenue and Expense Allocation (Millions of Dollars): 2016 2017 2018 Operating revenue Gross inpatient service $ 26.117 $ 29.148 $ 33.216 ross outpatient service 6.535 9.130 11.912 Gross patient service revenue $ 32.652 $ 38.27 $ 45.128 Contractual allowances $ 1.729 $ 5.196 $ 7.516 Bad debt and charity care 2.127 2.506 3.030 Total revenue deductions $ 3.856 10.546 Net patient service revenue $ 28.796 $ 30.576 $ 34.582 Operating expenses 962 words English (United States) & Accessibility: Investigate Focus E + 99%Calibri(Bo... v 12 v AA AV Aav A0 Draw Design Layout References Mailings Review View Table Design Layout 9 Tell me l 1T AastcodEe AaEthDdEe AaBchDt AaBchDdEE AaBb( > M D Comments Q Paste '6 B I U v ab x x2 A v p v A v /i/ V v Normal No Spacing Heading 1 Heading 2 Title Styles Dictate 2 _ 7 Selected Operating Data: 1016 2:217 2:215 Medicare discharges 2,721 2,860 2,741 Total discharges 8,784 8.318 8.576 Outpatient visits 32,255 32.878 36.796 Licensed beds 210 no 21o Staffed beds 193 197 173 Patient days 44,oas 42,434 40,062 Allpayer case Mix Index 1.2869 1.2993 1.3151 Full-time equivalents 510.3 625.3 519.3 2o14 industry Data (200.299 Beds) 2016 21:17 2013 +Quanile Median Quartile Profitability Ratios Total margin 3.7574 6.48% 5.75); 5.531 3.43% 0.531 Return on assets 5.757: 3,97x 4,53% 5.8M 3,107: Max Return on equity 9.541 7.097: 7.66% 15.66% 5.01: c.52x Deductible ratio 12.12 0.211 12.23 o.34 0.26 0.13 Liquidity Ratios current ratio 3.91 2.92 2.67 2.53 1.99 143 Days cash on hand 68.08 66,37 3272 32.35 15.59 5.24 Debt Management Ratios Debt ratio 39.737: 44.o3x 40,9\" 52.9ox 43.407: 35.2ox Debt to equity 55.35x 54.547; 55.4724 127.1212: 64.7ox 16.90% Times interest earned 3.23 2.32 2.33 4.29 2.23 1.14 Cash aw coverage 5.22 3.93 3.95 5.32 3.22 1.75 Asset Management Ratios Fixed asset turnover 0.84 0,79 0,86 2,20 1,76 1.49 Total asset turnover 12.55 0.51 12.57 1.o4 0.59 12.75 Current asset turnover 3.o7 2.71 3th 5.94 3.33 2.33 Days in patient accounts receivable 5525 57.73 7324 37.53 7557 53.33 Average payment period (days) 36.39 54.05 51.52 71.24 56.52 45.84 other Ratios Average age of plant (years) 5.03 5,33 6,12 8.36 7,39 6,14 Selected Operating Inditatorst 962 words [[3 English (United States) 7?)? Accessibility: Investigate Focus / Editing AutoSave OFF A A CG ... w- 2.6 - Saved to my Mac Q Home Insert Draw Design Layout References Mailings Review View Table Design Layout ? Tell me Comments Editing Share Calibri (Bo... v 12 A A Aa Ap AaBbCcDdEe AaBbCcDdEe AaBbCcDc AaBbCcDdEE AaBb( , Paste BI Uvab X x |A DAY EEEE Norma No Spacing Heading 1 Heading 2 Title Styles Dictate Sensitivity Editor Pane Average age of plant (years) 5.03 5.39 6.12 8.86 7.39 6.14 Selected Operating Indicators: 2014 Industry Data (200-299 Beds) 2016 2017 2018 +Quartile Median Quartile Profit Indicators Profit per inpatient discharge $280.03 $126.72 $79.61 $89.04 ($21.30) ($120.08) Profit per outpatient visit ($33.07) ($24.49) ($1.60) $6.22 $0.66 ($7.01) Net Revenue Indicators Net revenue per discharge $2,622 $2,799 $2,968 $4,091 $3,411 $2,815 Net revenue per visit $17 $222 $248 $201 $13 $98 Medicare revenue percentage 0.98% 34.38% 31.96% 3-47% $6.60 31.25% Bad debt / charity care percentage 6.51% 6.55% 6.71% 7.89% 4.76 2.97% Contractual allowance percentage 5.30 13.57% 16.65% 25-27%% 20.02 12.12% Outpatient revenue percentage 20.01% 23.85% 26.40% 5.26% 21.03% 17.44% Volume Indicators Occupancy rate 62.58% 59.01% 61.66% 57.12% 58.10% 47.84% Average daily census 120.78 116.26 109.76 173.23 144.73 114.39 Length of Stay Indicators Average length of stay (days) 5.02 5.10 4.67 6.80 6.07 5.41 Adjusted length of stay 3.90 3.9 3-55 6.48 5.3 4.52 Expense Indicators Expense per discharge $2,342 $2,672 $2,888 $3,937 $3,392 $2,972 Expense per adjusted discharge $1,820 $2,057 $2,195 $3,417 $2,924 $2,572 Expense per visit $212 $246 $250 $202.23 $141.97 $111.53 All-payer Case Mix Index 1.2869 1.2993 1.3161 1.2795 1.1756 1.0259 Efficiency Indicators FTEs per occupied bed 4.04 4.10 4-15 4.59 4.15 3-77 Labor hours/visit 7.88 9.44 9.24 8.66 5.84 4.68 Unit Cost Indicators Salary per FTE $20,047 $19,923 $22,596 $24,447 $22,517 $20,347 Fringe benefits percentage 14.94% 9.31% 18.35% 19.58% 17.04% 15.18% Liability expense per discharge $15.94 $24.16 $25.42 $80.94 $42.05 $18.31 Note: The quartile values are based on the upper and lower numerical values regardless of whether that value is good or bad. The interpretation is left to the analyst. 962 words English (United States) & Accessibility: Investigate Focus E + 99%