Assignment-3 Horizontal, Vertical, and ratio Analysis Exhibits 4.27a & 4.27b show the statement of operations and balance sheet for the 310-bed Wakeland Community Hospitals for 20X0 and 20X1. Adjusted discharges doe 20X0 and 20X1 are 25,000 and 26,000, respectively. Questions: a. Performa horizontal analysis on both statement b. Perform a vertical analysis on both statement relative to 20X0 C. Compute all 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 millions, whereas adjusted discharges, as mentioned, are 25,000 in 20X0 and 26,000 in 20X1. 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) 20X1 20xo Revenues Net patient service revenue Other operating revenue Total operating revenues $225,000 6,400 231,400 $210,000 5,700 215,700 Operating expenses Salaries and benefits Supplies and other expenses Depreciation Interest Total operating expenses 124,173 85,000 12,000 4,500 225,673 110,167 61,000 11,300 2,500 184,967 Income from operations 5,727 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 Wakeland Community Hospital Balance Sheet December 31, 20X1 and 20X0 (in thousands) 20X1 20x0 Current assets Cash and cash equivalents Net patient accounts receivables Inventories Other current assets Total current assets $40,500 39,500 3,800 6,500 90,300 $35,500 36,400 4,000 5,200 81,100 Plant, property, and equipment Gross plant, property, and equipment (Less accumulated depreciation) Net property, plant, and equipment 215,000 (65,000) 150,000 175,500 (107,000) 68,500 Funded depreciation/board-designated funds Cash and short-term investments 185,000 110,000 Total assets $425,300 $259,600 Current liabilities Accounts payable Salaries payable Notes payable Total current liabilities $14,500 4,500 4,300 23,300 $8,500 3,500 4,500 16,500 Long-term liabilities Bonds payable Total long-term liabilities 60,000 60,000 27,500 27,500 Net assets 342,000 215,600 Total liabilities and net assets $425,300 $259,600 EXHIBIT 4.16a FINANCIAL RATIOS FOR ALL U.S. HOSPITALS BY BED SIZE Optum & CMS Median Ratio" Hospital Industry 1-99 Beds 100-199 Beds 200-299 300-399 Beds Beds Desired 400+ Beds Position 2.11 1.52 0.30 49 86 50 2.18 1.65 0.35 47 85 45 2.04 1.39 0.18 45 81 51 1.88 1.27 0.20 44 102 56 1.71 1.42 0.20 48 76 53 1.84 1.50 0.38 44 119 52 Above Above Above Below Above Below $7,448 $7,197 40% $7,086 $6,494 40% $6,407 $6,112 38% $6,766 $6,260 38% $7,121 $6,819 38% $7,517 $7,399 38% Above Below Below Ratio Liquidity ratios Current ratio Quick 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 operating expense Operating margin Nonoperating revenue Return on total assets Return on net assets Activity ratios Total asset turnover ratio Net fixed assets turnover ratio Age of plant ratio Capital structure ratios Long-term debt to net assets ratio Net assets to total assets ratio Times interest earned ratio Debt service coverage ratio 0.03 0.04 0.04 0.08 0.02 0.05 0.04 0.08 0.03 0.03 0.04 0.08 0.04 0.05 0.04 0.09 0.04 0.07 0.05 0.10 0.04 0.17 0.05 0.09 Above Varies Above Above 1.07 2.12 10.31 1.19 2.17 10.41 1.03 2.03 10.12 0.99 2.11 11.97 1.03 2.04 10.93 1.06 2.21 11.19 Above Above Below 0.21 0.54 3.78 3.18 0.18 0.58 3.47 3.51 0.31 0.51 3,43 3.63 0.42 0.47 3.64 3.50 0.38 0.52 4.43 6.36 0.59 0.48 5.13 4.24 Below Above Above Above All ratio values, except for quick, acid test, and salary and benefit expense as a percentage of operating expense ratios were obtained from Optum Insight, 2013 Almanac of Hospital Financial and Operating Indicators, 2011/2010 median value data. The quick, acid test, and salary and benefit expense as a percentage of operating expense ratios were obtained from 2010 CMS cost report data. "These are true up to a certain point. For example, in general the higher the better for the current ratio, but after a certain point, the organization might be better off investing some of the excess cash. Assignment-3 Horizontal, Vertical, and ratio Analysis Exhibits 4.27a & 4.27b show the statement of operations and balance sheet for the 310-bed Wakeland Community Hospitals for 20X0 and 20X1. Adjusted discharges doe 20X0 and 20X1 are 25,000 and 26,000, respectively. Questions: a. Performa horizontal analysis on both statement b. Perform a vertical analysis on both statement relative to 20X0 C. Compute all 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 millions, whereas adjusted discharges, as mentioned, are 25,000 in 20X0 and 26,000 in 20X1. 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) 20X1 20xo Revenues Net patient service revenue Other operating revenue Total operating revenues $225,000 6,400 231,400 $210,000 5,700 215,700 Operating expenses Salaries and benefits Supplies and other expenses Depreciation Interest Total operating expenses 124,173 85,000 12,000 4,500 225,673 110,167 61,000 11,300 2,500 184,967 Income from operations 5,727 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 Wakeland Community Hospital Balance Sheet December 31, 20X1 and 20X0 (in thousands) 20X1 20x0 Current assets Cash and cash equivalents Net patient accounts receivables Inventories Other current assets Total current assets $40,500 39,500 3,800 6,500 90,300 $35,500 36,400 4,000 5,200 81,100 Plant, property, and equipment Gross plant, property, and equipment (Less accumulated depreciation) Net property, plant, and equipment 215,000 (65,000) 150,000 175,500 (107,000) 68,500 Funded depreciation/board-designated funds Cash and short-term investments 185,000 110,000 Total assets $425,300 $259,600 Current liabilities Accounts payable Salaries payable Notes payable Total current liabilities $14,500 4,500 4,300 23,300 $8,500 3,500 4,500 16,500 Long-term liabilities Bonds payable Total long-term liabilities 60,000 60,000 27,500 27,500 Net assets 342,000 215,600 Total liabilities and net assets $425,300 $259,600 EXHIBIT 4.16a FINANCIAL RATIOS FOR ALL U.S. HOSPITALS BY BED SIZE Optum & CMS Median Ratio" Hospital Industry 1-99 Beds 100-199 Beds 200-299 300-399 Beds Beds Desired 400+ Beds Position 2.11 1.52 0.30 49 86 50 2.18 1.65 0.35 47 85 45 2.04 1.39 0.18 45 81 51 1.88 1.27 0.20 44 102 56 1.71 1.42 0.20 48 76 53 1.84 1.50 0.38 44 119 52 Above Above Above Below Above Below $7,448 $7,197 40% $7,086 $6,494 40% $6,407 $6,112 38% $6,766 $6,260 38% $7,121 $6,819 38% $7,517 $7,399 38% Above Below Below Ratio Liquidity ratios Current ratio Quick 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 operating expense Operating margin Nonoperating revenue Return on total assets Return on net assets Activity ratios Total asset turnover ratio Net fixed assets turnover ratio Age of plant ratio Capital structure ratios Long-term debt to net assets ratio Net assets to total assets ratio Times interest earned ratio Debt service coverage ratio 0.03 0.04 0.04 0.08 0.02 0.05 0.04 0.08 0.03 0.03 0.04 0.08 0.04 0.05 0.04 0.09 0.04 0.07 0.05 0.10 0.04 0.17 0.05 0.09 Above Varies Above Above 1.07 2.12 10.31 1.19 2.17 10.41 1.03 2.03 10.12 0.99 2.11 11.97 1.03 2.04 10.93 1.06 2.21 11.19 Above Above Below 0.21 0.54 3.78 3.18 0.18 0.58 3.47 3.51 0.31 0.51 3,43 3.63 0.42 0.47 3.64 3.50 0.38 0.52 4.43 6.36 0.59 0.48 5.13 4.24 Below Above Above Above All ratio values, except for quick, acid test, and salary and benefit expense as a percentage of operating expense ratios were obtained from Optum Insight, 2013 Almanac of Hospital Financial and Operating Indicators, 2011/2010 median value data. The quick, acid test, and salary and benefit expense as a percentage of operating expense ratios were obtained from 2010 CMS cost report data. "These are true up to a certain point. For example, in general the higher the better for the current ratio, but after a certain point, the organization might be better off investing some of the excess cash