Assignment 6.2: Ratio Analysis

Instructions:

1. Review the following table:

XYZ Hospital

Balance Sheet

December 31, 20xx

	Description	Amount
Current Assets	Cash and investments (savings/checking)	$80,000
	Patient revenue (money owed to hospital)	$472,000
	Inventory (on the shelf)	$16,400
	Subtotal	$568,400
	Less
	Bad debt	($57,200)
	Charitable allowance	($14,100)
	Contractual allowance	($269,300)
	Subtotal	($340,600)
	Total Current Assets	$227,800
Fixed Assets	Land	$29,000
	Buildings (plant)	$805,000
	Equipment	$610,000
	Construction in progress	$37,000
	Total Fixed Assets	$1,481,000
	Less accumulated depreciation	($880,800)
	Net Fixed Assets	$600,200
	Total Assets	$828,000
Current Liabilities	Accounts payable salaries, supplies, pharmaceutical	$36,560
	Accrued compensation and benefits	$10,900
	Accrued liabilities (interest, physician contracts)	$10,870
	Total Current Liabilities	$58,330
Debt	Long-term debt	$38,000
	Short-term debt	$2,100
	Total Debt	$40,100
	Total Liabilities (Total Current Liabilities + Debt)	$98,430
	Net Worth (Assets Liabilities)	$729,570
	Total Liabilities and Net Worth	$828,000

2. Complete the following based on information provided in the table:

a. Calculate the current ratio, quick ratio, and debt ratio.

b. What information do each of these ratios provide?

c. For each of the three ratios, give one way each ratio could be positively impacted.

d. For each of the three ratios, give one way each ratio could be negatively impacted.

e. When assessing the results of these ratios, what advice would you have for this organization if it was considering securing financing for a major capital expense?