21.Horizontal, vertical, and ratio analyses. Exhibits 4.27a and 4.27b show the statement of operations and balance sheet for the 310-bed Wakeland Community Hospital for 20X0 and 20X1. Adjusted discharges for 20X0 and 20X1 are 25,000 and 26,000, respectively.

a. Perform a horizontal analysis on both statements.

b. Perform a vertical analysis on both statements relative to 20X0

c. Compute all the selected ratios listed in Exhibit 4.16a, and compare them with the industry benchmarks.

Using these financial performance measures, evaluate the financial state of Wakeland Community. The debt principal payments each year are $5.5 million, whereas adjusted discharges, as mentioned, are 25,000 in 20X0 and 26,000 in 20X1.

Exhibit 4.16a

Ratio	Optum & CMS Median Ratio Hospital Industry	1-99 beds	100-199 beds	200-299 beds	300-399 beds	400+ beds	Desired position
Liquidity Ratios
Current ratio	2.11	2.18	2.04	1.88	1.71	1.84	Above
Quick ratio	1.52	1.65	1.39	1.27	1.42	1.50	Above
Acid test ratio	0.30	0.35	0.18	0.20	0.20	0.38	Above
Days in account rec.	49	47	45	44	48	44	Below
Days cash on hand	86	85	81	102	76	119	Above
Average pmt period, days	50	45	51	56	53	52	Below
Revenue, expense, and profitability ratios
Operating revenue per adjusted	$7,448	$7,086	$6,407	$6,766	$7,121	$7,517	Above
Operating expense per adjusted	$7,197	$6,494	$6,112	$6,260	$6,819	$7,399	Below
Salary and benefit expense as a percentage of operating expense	40%	40%	38%	38%	38%	38%	Below
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 nets assets	0.08	0.08	0.08	0.09	0.10	0.09	Above
Activity ratios
Total asset turnover ratio	1.07	1.19	1.03	0.99	1.03	1.06	Above
Net 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	0.21	0.18	0.31	0.42	0.38	0.59	Below
Net assets to total assets ratio	0.54	0.58	0.51	0.47	0.52	0.48	Above
Times interest earned ratio	3.78	3.47	3.43	3.64	4.43	5.13	Above
Debt service coverage ratio	3.18	3.51	3.63	3.50	6.36	4.24	Above

EXHIBIT 4.27a STATEMENT OF OPERATIONS FOR WAKELAND COMMUNITY HOSPITAL

Wakeland Community Hospital

Statement of Operations for the Years Ended December 31, 20X1 and 20X0 (in thousands)

Particulars	20x1	20x0
Revenues
Net patient service revenue	$225,000	$210,000
Other operating revenue	6,400	5,700
Total operating revenues	231,400	215,700
Operating expenses
Salaries and benefits	124,173	110,167
Supplies and other expenses	85,000	61,000
Depreciation	12,000	11,300
Interest	4,500	2,500
Total operating expenses	225,673	184,967
Income from operations	5,757	30,733
Nonoperating income
Investment income/contributions	7,500	8,500
Excess of revenue over expenses	13,227	39,233
Net Income	13,227	39,233

Exhibit 4.27b Balance Sheet for Wakeland Community Hospital

Particulars	20x1	20x0
Current assets
Cash and cash equivalents	$40,500	$35,500
Net patient A/R	39,500	36,400
Inventories	3,800	4,000
Other current assets	6,500	5,200
Total current assets	90,300	81,100
Plant, property, and equipment
Gross plant, property, and equipment	215,000	175,500
Less Accumulated depreciation)	(65,000)	(107,000)
Net property, plant, and equipment	12,000	11,300
Interest	4,500	2,500
Total operating expenses	225,673	184,967
Income from operations	5,757	30,733
Funded depreciation/board-designated funds
Cash and short-term investments	185,000	110,000
Total assets	$425,300	$259,600
Current liabilities
Account Payable	$14,500	$8,500
Salaries payable	4,500	3,500
Notes payable	4,300	4,500
Total current liabilities	23,300	16,500
Long-term liabilities
Bonds payable	60,000	27,500
Total long-term liabilities	60,000	27,500
Net assets	342,000	215,600
Total liabilities and assets	$425,300	$259,600