20. Ratio analysis. Allen Community Hospital is a small, 95-bed hospital. The hospital just completed a major renovation of its facility, which has helped to attract new physi- cians and patients to the hospital. Assess Allen's revenue, expense, and profitability; liquidity; activity; and capital structure ratios. Using the financial ratios from Exhibit 4.26 for the current and previous years, evaluate Allen's financial condition and also compare its ratios to national industry benchmarks for its bed size, using the data from Exhibits 4.16a. 199 REVIEW QUESTIONS AND PROBLEMS EXHIBIT 4.26 SELECTED FINANCIAL RATIOS FOR ALLEN COMMUNITY HOSPITAL Ratio 20X1 20x0 1.90 0.20 53 2.18 0.35 63 90 50 70 75 $6,900 $6,800 50% $6,500 $6,600 45% Liquidity ratios Current ratio Acid test ratio Days in accounts receivable Days cash on hand Average payment period (days) Revenue, expense, and profitability ratios Operating revenue per adjusted discharge Operating expense per adjusted discharge Salary and benefit expense as a percentage of total operating expense Operating margin Return on assets Activity ratios Total asset turnover Fixed asset turnover Age of plant Capital structure ratios Long-term debt to equity Equity to total assets Debt service coverage ratio 0.01 0.03 (0.01) 0.02 1.20 2.95 7.85 0.95 2.20 11.52 1.47 0.25 2.00 1.40 0.23 3.02 EXHIBIT 4.16a FINANCIAL RATIOS FOR ALL U.S. HOSPITALS BY BED SIZE 102 Optum & CMS Median Ratio 200-299 300-399 Ratio Desired Hospital Industry 1-99 Beds 100-199 Beds Beds Beds 400+ Beds Position Liquidity ratios Current ratio 2.11 2.18 204 1.88 1.84 Above Quick ratio 1.52 1.65 139 1.27 HAR 1.50 Above Acid test ratio 0.30 0.35 0.18 0.20 020 038 Above Days in accounts receivable 49 47 45 44 44 Below Days cash on hand 36 85 81 76 119 Above Average payment period, days SO 45 51 56 53 52 Below Revenue, expense, and profitability ratios Operating revenue per adjusted discharge $7.448 $7,086 $6,407 $6,766 $7.121 57,517 Above Operating expense per adjusted discharge $7,197 56,494 56,112 56,260 $6,819 $7.399 Below Salary and benefit expense as a percentage 40% 38% 38% 38% Below of operating expense Operating margin 0.03 0.02 0.03 0.04 0.04 0.04 Above Nonoperating revenue 0.04 0.05 0.03 0.05 0.07 0.17 Varies Return on total assets 0.04 0.04 0.04 0.04 0.05 0.05 Above Return on net assets OOR 0.08 0.09 0.10 0.09 Above Activity ratios Total asset turnover ratio 1.07 1.19 1.03 0.90 1.03 1.06 Above Net fixed assets turnover ratio 2.12 2.17 2.03 2.11 2.04 2.21 Above Age of plant ratio 10:31 10.41 10.12 11.97 10.93 11.19 Below Capital structure ratios Long-term debt to net assets ratio 0.18 0.31 0.38 0.59 Below Net assets to total assets ratio 0.54 058 0.51 0.52 0.48 Above Times interest earned ratio 3.78 3.47 3:43 3.64 5.13 Above 351 3.18 Debt service coverage ratio 3.63 3.50 6.36 424 Above All ratio values, except for quick and test and salary and benefit expense as a percentage of operating experts, were obtained from Optum night 2013 Ana Hicond Operating Indicatori, 2011/2010 median value data. The quick acidint and salary and benefit expense acentage of operating expenserwin were obtained from 2016 CMS cost report dura These are the to a certain point for emple, in general the higher the better for the current butter a certain point, the on might be better of the ting some of the scem 0.08 0.21 0.42 0.47 185 20. Ratio analysis. Allen Community Hospital is a small, 95-bed hospital. The hospital just completed a major renovation of its facility, which has helped to attract new physi- cians and patients to the hospital. Assess Allen's revenue, expense, and profitability; liquidity; activity; and capital structure ratios. Using the financial ratios from Exhibit 4.26 for the current and previous years, evaluate Allen's financial condition and also compare its ratios to national industry benchmarks for its bed size, using the data from Exhibits 4.16a. 199 REVIEW QUESTIONS AND PROBLEMS EXHIBIT 4.26 SELECTED FINANCIAL RATIOS FOR ALLEN COMMUNITY HOSPITAL Ratio 20X1 20x0 1.90 0.20 53 2.18 0.35 63 90 50 70 75 $6,900 $6,800 50% $6,500 $6,600 45% Liquidity ratios Current ratio Acid test ratio Days in accounts receivable Days cash on hand Average payment period (days) Revenue, expense, and profitability ratios Operating revenue per adjusted discharge Operating expense per adjusted discharge Salary and benefit expense as a percentage of total operating expense Operating margin Return on assets Activity ratios Total asset turnover Fixed asset turnover Age of plant Capital structure ratios Long-term debt to equity Equity to total assets Debt service coverage ratio 0.01 0.03 (0.01) 0.02 1.20 2.95 7.85 0.95 2.20 11.52 1.47 0.25 2.00 1.40 0.23 3.02 EXHIBIT 4.16a FINANCIAL RATIOS FOR ALL U.S. HOSPITALS BY BED SIZE 102 Optum & CMS Median Ratio 200-299 300-399 Ratio Desired Hospital Industry 1-99 Beds 100-199 Beds Beds Beds 400+ Beds Position Liquidity ratios Current ratio 2.11 2.18 204 1.88 1.84 Above Quick ratio 1.52 1.65 139 1.27 HAR 1.50 Above Acid test ratio 0.30 0.35 0.18 0.20 020 038 Above Days in accounts receivable 49 47 45 44 44 Below Days cash on hand 36 85 81 76 119 Above Average payment period, days SO 45 51 56 53 52 Below Revenue, expense, and profitability ratios Operating revenue per adjusted discharge $7.448 $7,086 $6,407 $6,766 $7.121 57,517 Above Operating expense per adjusted discharge $7,197 56,494 56,112 56,260 $6,819 $7.399 Below Salary and benefit expense as a percentage 40% 38% 38% 38% Below of operating expense Operating margin 0.03 0.02 0.03 0.04 0.04 0.04 Above Nonoperating revenue 0.04 0.05 0.03 0.05 0.07 0.17 Varies Return on total assets 0.04 0.04 0.04 0.04 0.05 0.05 Above Return on net assets OOR 0.08 0.09 0.10 0.09 Above Activity ratios Total asset turnover ratio 1.07 1.19 1.03 0.90 1.03 1.06 Above Net fixed assets turnover ratio 2.12 2.17 2.03 2.11 2.04 2.21 Above Age of plant ratio 10:31 10.41 10.12 11.97 10.93 11.19 Below Capital structure ratios Long-term debt to net assets ratio 0.18 0.31 0.38 0.59 Below Net assets to total assets ratio 0.54 058 0.51 0.52 0.48 Above Times interest earned ratio 3.78 3.47 3:43 3.64 5.13 Above 351 3.18 Debt service coverage ratio 3.63 3.50 6.36 424 Above All ratio values, except for quick and test and salary and benefit expense as a percentage of operating experts, were obtained from Optum night 2013 Ana Hicond Operating Indicatori, 2011/2010 median value data. The quick acidint and salary and benefit expense acentage of operating expenserwin were obtained from 2016 CMS cost report dura These are the to a certain point for emple, in general the higher the better for the current butter a certain point, the on might be better of the ting some of the scem 0.08 0.21 0.42 0.47 185