2. In examining the financial statements, you notice that Happy Hospital is sitting on a sizeable amount of current assets, compared to current liabilities.
a. What does the term liquidity mean, and how does that differ from the term solvency? 3 POINTS
b. Calculate and interpret the current ratio for each year presented. 4 POINTS
c. Comment on the components of current assets and current liabilities and offer advice about how
Happy Hospital may better manage some accounts. Be specific in mentioning certain accounts that seem significant to you and why.
7:02 AM 1 of 3 TABLE 18-8 Happy Hospital Statement of Financial Position As of December 31, 2019 and 2018 December 31 2018 2018 Assets Current assets Gashand cathequivalents $5,033,429 5500 Patents receivile, net datowances for collectibles 14,723,240 9937932 Inventory 1,047,044 UM Prepaid expenses and other one 737,455 504322 Tout comments 21.541,168 12480.935 Assetsmited to use 55,732,204 5572304 Trivestments 1,639,529 16:52 Property and equipment, net 17,112,205 16347150 Pred penco 296,797 2007 Tols 596.321.903 47 Ciabilities and let Assets Current les Accounts Dwyable and accrued expenses $ 1.406.266 1.01.18 Acord compension and amount withheld 9.823,520 2365 Une revenge 1,950,000 Curent portion of estimated to party settlements 322,161 322161 Total currenties 13,501.947 22 Estimated third-party settlements, less cuvent portion 3.697.939 Long term.dett 1,490,500 Total abilities 18,690,366 3020723 Net Without donorretion 76,632,073 77 ARCO With donar restrictions 998,544 Total cases 77,631.512 7847655 Total sites and reassen $ 96,321.993 TABLE 18-9 Happy Hospital Statement of Operations As of December 31, 2019 and 2018 Year Ended December 31 2019 2018 Unrestricted Revenges Net patient service revenue $ 53,135,700 $ 51.119.826 Other operating revenue 1.950.000 2.999.626 Total unrestricted 55,085,700 54102452 Expenses Wages 52,134,681 47325,259 Insurance 1,165,629 1.005,783 Inventory 954,000 1225524 interest 62,700 Depreciation 569,654 2,561,983 Provision for uncollectible accounts 1,594,071 2.220.044 Total expenses 56.480.735 54,938.592 Gairloss) from Operations before adustments to prior year third-party payer settlements and pension expense necess of plan contribution Pension expense in excess of plan comibution Adjustments to prior year third party payer settlements Operating to income (1,395,035) 0 1829.140 (1,001.3751 329626 11500 (1,395,035) Nonoperating gains Investment income Untestricted gifts and bequests Other miscellaneous income Nonoperating sains 550.000 0 550,000 3.82 33654 1953 4044.646 (845,035) 2.543,759 Excess of revenues and gains over expenses Other changes in net assets without with doro Changes in net unrealed gain as westments Increase in unrestricted net assets 966956 SIS 1845,035) TABLE 18-10 Happy Hospital Statement of Cash Flows As of December 31, 2019 and 2018 Year Ended December 31 2019 2016 Operating Activities Increase/decrease in net assets 5 1845,035) 3.615.619 Adjustments to reconcile increase feel in neratiets to net each provided by operating activites Deprecation 569.654 2561 98 Per realized and realized gains on investmeres 8.208.30 Donor restricted investment income 34000 Provision for uncollectible accounts 1.594,071 2.770054 Loss on disposal of property and equipment 03.185 Gainon capital on 1550.000 Changes in operating assets and abilities Patient accounts recevable gross 16,379,379 12.119.526 Other receivables (727.286 Inventory 187,300 0962 Prepaid expenses and other assets (233, 1261 467 SBB Prepaid pension asset 1001373 Accounts payable and accrued expenses 195,0421 15.164 Accrued compensation and amounts withheld 7,424,155 19227 Unearned revenue 1.950.000 Estimated this party payer settlements 900.000 Net cash provided by operating activities 3.522.598 2110 Investing Activities Expenditures for property and equipment 1784,000) 200855 Proceeds from sales of property and equipment 27900 Purchases of investments Net cash used in investing activities 0784.000 2. Financing Activity Loan proceeds 1,500,000 Loan repayment 19.500 Donor-resicted invest income 34.000 Niet cash provided by firanding activity 1.290.500 34.000 Increased cash and cash equivalents 4,229,098 90.000 Cash and casheguvalents beginning of yes 304331 105331 Casti and cash equivalere end of you 3,033,429 804331
