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Posted on Jul 31, 2024

Brief to the Board of Directors Once you have completed your financial analysis, interpret the ratios and vertical and horizontal analyses to evaluate the business

Brief to the Board of Directors Once you have completed your financial analysis, interpret the ratios and vertical and horizontal analyses to evaluate the business performance of Lueders Medical Clinic. In your brief, make sure to refer to your financial analysis workbook. It is important that you explain what each ratio tells you about the clinics performance. Then, recommend whether it is a good investment for the hospital to purchase the clinic. Use your financial analysis workbook to explain your decision.

Specifically, address the following in your brief:

Examine the clinics financial performance.
- How does the clinics financial performance compare against industry averages and past performance?
- What are the strengths and weaknesses of the clinics financial performance?
Recommend appropriate actions using your financial analysis as support.
- Is purchasing the clinic is a good or bad investment?
- What are some potential areas of improvement?

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Notes Accounts Accounts receivable Supplies inventory Property and equipment Bad debts Total contractual allowances Net patient revenue Salaries and wages Long-term liabilities Lueders Medical Clinic Horizontal Analysis of Selected Accounts 2018 $ 2017 S Change Percent 66,135.00 75,675.00 (9,540.00) -0.1261 19,340.00 30,100.00 (10,760.00) -0.3575 60,321.00 37,672.00 22,649.00 0.6012 11,500.00 18,440.00 (6,940.00) -0.3764 505,200.00 465,000.00 40,200.00 0.0865 338,800.00 310,000.00 28,800.00 0.0929 165,320.00 139,279.00 26,041.00 0.1870 15,000.00 12,355.00 2,645.00 0.2141 Notes Vertical Analysis: Fill in the correct information for each of the base amounts below. Lueders Medical Clinic Vertical Analysis of Selected Accounts Year 2018 Year 2017 Industry Accounts Amount $ Percent Amount $ Percent Accounts receivable 66,135.00 0.415 75,675.00 0.487 45% Supplies inventory 19,340.00 0.121 30,100.00 0.194 10% Net patient revenue 338,800.00 1.000 310,000.00 1.000 100% Accounts payable 65,450.00 0.410 41,254.00 0.265 26% Salaries and wages 165,320.00 0.488 139,279.00 0.449 11% Depreciation and amortization 12,500.00 0.037 17,650.00 0.057 80% Long-term liabilities 15,000.00 0.094 12,355.00 0.079 69 Net income 1,424.00 0.004 513.00 0.002 10% Base Amount for Balance Sheet: 2018| 159,446.00 2017| 155,447.00 Base Amount for Income Statement: 2018| 338,800.00 2017 310,000.00 Calculation 2018 Calculation 2017 Industry Average Ratios Current Ratio Current Assets / Current Liabilities 1.29 99125.00/88400.00 1.1213 117775.00/77799.00 1.5138 Liquidity Ratios Quick Ratio (Acid Test) (Current Assets - Supplies Inventory) / Current Liabilities 0.68 125.00-19340.00)/88400.00 0.9025 7775.00-30100.00)/77799.00 1.1269 Debt to Total Assets Total Debt/Total Assets 0.4 103400.00/159446.00 0.6484 90154.00/155447.00 0.5799 Debt Ratios Times Interest Earned (Net Income + Interest Charges)/Interest Charges 2.5 (1424.00+1819.00)/1819.00 1.7828 (513.00+2750.00)/2750.00 1.1865 Inventory Turnover Net Patient Service Revenue / Supplies Inventory 25 338800.00/19340.00 17.5180 310000.00/30100.00 10.2990 55.4 66135.00/928.2191 71.2493 75675.00/849.3150 89.1012 Asset Average Collection Period Accounts Receivable /Net Patient Service Revenues Per Day Management Ratios Net Patient Service Revenue / Fixed Assets Fixed Assets Turnover 5.2 338800.00/60321.00 5.6166 310000.00/37672.00 8.2289 Total Assets Turnover Net Patient Service Revenue /Total Assets 3 338800.00/159446.00 2.1248 310000.00/155447.00 1.9942 Profit Margin on Revenue Net Income / Net Patient Service Revenue 0.59 1424.00/338800.00 0.0042 513.00/310000.00 0.0016 Return on Total Assets Net income / Total assets Profitability Ratios 4.8 1424.00/159446.00 0.0089 513.00/155447.00 0.0033 Return on Equity Natincome / Fouit 0.0975 1424 00546.00 51210/54169.00 Inventory Turnover Net Patient Service Revenue / Supplies Inventory 25 338800.00/19340.00 17.5180 310000.00/30100.00 10.2990 55.4 66135.00/928.2191 71.2493 75675.00/849.3150 89.1012 Average Collection Period Accounts Receivable / Net Patient Service Revenues Per Day Asset Management Ratios Fixed Assets Turnover Net Patient Service Revenue / Fixed Assets 5.2 338800.00/60321.00 5.6166 310000.00/37672.00 8.2289 Total Assets Turnover Net Patient Service Revenue / Total Assets 3 338800.00/159446.00 2.1248 310000.00/155447.00 1.9942 Profit Margin on Revenue Net Income / Net Patient Service Revenue 0.59 1424.00/338800.00 0.0042 513.00/310000.00 0.0016 Return on Total Assets Net income /Total assets Profitability Ratios 4.8 1424.00/159446.00 0.0089 513.00/155447.00 0.0033 Return on Equity Net income / Equity 0.0975 1424.00/50546.00 0.0281 513.00/54169.00 0.0094 Notes Accounts Accounts receivable Supplies inventory Property and equipment Bad debts Total contractual allowances Net patient revenue Salaries and wages Long-term liabilities Lueders Medical Clinic Horizontal Analysis of Selected Accounts 2018 $ 2017 S Change Percent 66,135.00 75,675.00 (9,540.00) -0.1261 19,340.00 30,100.00 (10,760.00) -0.3575 60,321.00 37,672.00 22,649.00 0.6012 11,500.00 18,440.00 (6,940.00) -0.3764 505,200.00 465,000.00 40,200.00 0.0865 338,800.00 310,000.00 28,800.00 0.0929 165,320.00 139,279.00 26,041.00 0.1870 15,000.00 12,355.00 2,645.00 0.2141 Notes Vertical Analysis: Fill in the correct information for each of the base amounts below. Lueders Medical Clinic Vertical Analysis of Selected Accounts Year 2018 Year 2017 Industry Accounts Amount $ Percent Amount $ Percent Accounts receivable 66,135.00 0.415 75,675.00 0.487 45% Supplies inventory 19,340.00 0.121 30,100.00 0.194 10% Net patient revenue 338,800.00 1.000 310,000.00 1.000 100% Accounts payable 65,450.00 0.410 41,254.00 0.265 26% Salaries and wages 165,320.00 0.488 139,279.00 0.449 11% Depreciation and amortization 12,500.00 0.037 17,650.00 0.057 80% Long-term liabilities 15,000.00 0.094 12,355.00 0.079 69 Net income 1,424.00 0.004 513.00 0.002 10% Base Amount for Balance Sheet: 2018| 159,446.00 2017| 155,447.00 Base Amount for Income Statement: 2018| 338,800.00 2017 310,000.00 Calculation 2018 Calculation 2017 Industry Average Ratios Current Ratio Current Assets / Current Liabilities 1.29 99125.00/88400.00 1.1213 117775.00/77799.00 1.5138 Liquidity Ratios Quick Ratio (Acid Test) (Current Assets - Supplies Inventory) / Current Liabilities 0.68 125.00-19340.00)/88400.00 0.9025 7775.00-30100.00)/77799.00 1.1269 Debt to Total Assets Total Debt/Total Assets 0.4 103400.00/159446.00 0.6484 90154.00/155447.00 0.5799 Debt Ratios Times Interest Earned (Net Income + Interest Charges)/Interest Charges 2.5 (1424.00+1819.00)/1819.00 1.7828 (513.00+2750.00)/2750.00 1.1865 Inventory Turnover Net Patient Service Revenue / Supplies Inventory 25 338800.00/19340.00 17.5180 310000.00/30100.00 10.2990 55.4 66135.00/928.2191 71.2493 75675.00/849.3150 89.1012 Asset Average Collection Period Accounts Receivable /Net Patient Service Revenues Per Day Management Ratios Net Patient Service Revenue / Fixed Assets Fixed Assets Turnover 5.2 338800.00/60321.00 5.6166 310000.00/37672.00 8.2289 Total Assets Turnover Net Patient Service Revenue /Total Assets 3 338800.00/159446.00 2.1248 310000.00/155447.00 1.9942 Profit Margin on Revenue Net Income / Net Patient Service Revenue 0.59 1424.00/338800.00 0.0042 513.00/310000.00 0.0016 Return on Total Assets Net income / Total assets Profitability Ratios 4.8 1424.00/159446.00 0.0089 513.00/155447.00 0.0033 Return on Equity Natincome / Fouit 0.0975 1424 00546.00 51210/54169.00 Inventory Turnover Net Patient Service Revenue / Supplies Inventory 25 338800.00/19340.00 17.5180 310000.00/30100.00 10.2990 55.4 66135.00/928.2191 71.2493 75675.00/849.3150 89.1012 Average Collection Period Accounts Receivable / Net Patient Service Revenues Per Day Asset Management Ratios Fixed Assets Turnover Net Patient Service Revenue / Fixed Assets 5.2 338800.00/60321.00 5.6166 310000.00/37672.00 8.2289 Total Assets Turnover Net Patient Service Revenue / Total Assets 3 338800.00/159446.00 2.1248 310000.00/155447.00 1.9942 Profit Margin on Revenue Net Income / Net Patient Service Revenue 0.59 1424.00/338800.00 0.0042 513.00/310000.00 0.0016 Return on Total Assets Net income /Total assets Profitability Ratios 4.8 1424.00/159446.00 0.0089 513.00/155447.00 0.0033 Return on Equity Net income / Equity 0.0975 1424.00/50546.00 0.0281 513.00/54169.00 0.0094