Examine the hospital's statement

of cash flows. What information do they provide regarding the

hospital's sources and uses of ca

sh over the past two years?

2. List five or more financial strengths of the hospit

al? (Hint: Do not provide a list of ratios. Make a

statement and then justify it with informati

on from the financial statements and ratios.)

3. List five or more financial weaknesses of the hospi

tal? (Hint: Do not provide a list of ratios. Make a

statement and then justify it with informati

on from the financial statements and ratios.)

4. The Board chair has asked management to develo

p some strategies to improve profitability and

estimate the impact of the strategies on the hospi

tal's ROE. By how much would the 2013 ROE change

from each of these strategies?

a. Vacant land is sold and total assets decreases

by $2.0 million. Net income would not be affected

and the Board wants to maintain the 2013 debt ratio.

b. Debt is substituted for equity

and the debt ratio increases to 48

percent. Total assets would not be

affected. Interest expense would increase but bette

r cost controls would offset the higher interest

expense and thus net income would not change.

c. LEAN management is implemented and total expens

es decrease by $0.5 million. Total revenue,

total assets, and total liabilities & net assets would not change.

d. Whatever strategy Melissa c

hooses, she is under pressure from

the Board to increase return on

equity to at least 10 percent. What total ma

rgin would be needed to achieve the 10% ROE, holding

everything else constant?

5. What additional financial information would be useful in the analysis?

6. Select five financial and five operating key perform

ance indicators (KPIs) to be presented at future

board meetings.

7. Sound financial analysis involves more than just

calculating numbers. The American Association of

Individual Investors suggests that investors cons

ider the qualitative factors below when evaluating a

company. Answer the questions for River Community

Hospital. When there is insufficient information

in the case to answer a question, briefly speculat

e about why the question might be relevant to the

hospital.

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Are the company's revenues tied to one key customer?

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To what extent are the company's revenues tied to one key product?

-

To what extent does the company rely on a single

supplier? (Hint: Physicians and nurses are key

suppliers of labor to a hospital.)

-

What about the competition?

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What are the company's future prospects?

-

How does the legal and regulatory

environment affect the company?

8. Based on the limited amount of information provid

ed in the case, what are your top three or four

recommendations to the board?

9. In your opinion, what are thr

ee key learning points from this case?