Using the financial statements from the Major Medical Center Case Study at the end of chapter 15, analyze the following:

Review the auditor’s opinion letter and analyze any concerns.

Review the financial statements. Analyze any unusual items and examine the balance sheet, operating statement, and cash flow statement.

Review the notes and analyze any causes for concern.

Calculate the following ratios using Excel: common size, current, quick, days of cash on hand, receivables turnover, average collection period, fixed asset turnover, total asset turnover, debt, debt to equity, times-interest-earned, operating margin, total margin, ROA, and RONA.

Evaluate Major Medical Center’s financial status.

Submit to your instructor your three- to four-page Word document (not including the title and reference pages) and your Excel worksheet. Your paper should be formatted according to APA style as outlined in the approved APA style guide, and you must cite at least three scholarly sources

Major Medical Center Statements of Financial Position December 31 2014 2013 (In Thousands)

Assets Current Assets  

Cash and cash equivalents $ 8,065 $ 9,005  

Assets limited as to use —

compensating balance for letters of credit 1,000 —  

Short-term investments 1,387 1,283  

Receivables for patient care, net of allowance for doubtful accounts (2014—$27,232; 2013—$31,934) 49,719 47,614  Pledges receivable 1,814 2,205  

Inventories, at average cost 1,690 2,326  

Due from third-party reimbursement programs 6,539 —  

Receivables for government grants — 467  

Other 2,234 3,415  

Total Current Assets $ 72,448 $ 66,315

Assets Limited as to Use  

Sinking fund 14,487 13,410  

Compensating balance for standby letters of credit 923 —

Long-term investments 1,132 618

Due from affiliates, net 3,417 3,543

Pledges receivable, net of allowance for uncollectible 

pledges (2014—$2,218; 2013—$4,453) 1,889 1,468

Property, plant, and equipment net 98,555 89,777

Deferred financing costs 1,323 —

Other 2,065 1,043 $196,239 $176,174

Liabilities and Net Assets Current Liabilities  

Current portion of long-term debt $ 11,608 $ 11,488  

Accounts payable and accrued expenses 29,489 25,311  

Accrued salaries and related liabilities 25,572 20,096  

Due to third-party reimbursement programs, net — 1,874  

Advances on government grants 1,587 —  

Total Current Liabilities $ 68,256 $ 58,769

Long-term debt, less current portion 55,539 47,709

Accrued post-retirement benefits 6,023 6,017

Other noncurrent liabilities 16,445 17,014

Total Liabilities $146,263 $129,509

Commitments and contingencies

Net Assets  

Unrestricted $ 40,582 $ 38,014  

Temporarily restricted 8,262 7,519  

Permanently restricted 1,132 1,132

Total Net Assets $ 49,976 $ 46,665

Total Liabilities and Net Assets $196,239 $176,174

Major Medical Center Statements of Operations Year ended December 31 2014 2013 (In Thousands)

Operating Revenue

Net patient service revenue $402,921 $369,512

Other revenue 13,356 13,850

Net assets released from restrictions 4,708 2,863  

Total Operating Revenue $420,985 $386,225

Operating Expenses Salaries and wages $207,141 $196,453

Employee benefits 44,456 44,860

Supplies and expenses 137,505 117,838

Depreciation and amortization 22,541 18,856

Research 2,457 2,214

Interest 4,456 5,253  

Total Operating Expenses $418,556 $385,474

Operating Income $ 2,429 $ 751

Net assets released from restrictions used for capital acquisitions 139 146

Increase in unrestricted net assets $ 2,568 $ 897

Major Medical Center Statements of Changes in Net Assets

Net Assets Unrestricted Temporarily Restricted Permanently Restricted (In Thousands)

Net Assets at December 31, 2012 $37,117 $3,023 $1,132

Increase in unrestricted net assets $ 897 $ — $ —

Restricted contributions, grants, and other receipts — 7,253 —

Investment income restricted for specific purposes — 252 —

Net assets released from restrictions for:  Operating expenses — (2,863) —  

Capital asset acquisitions — (146) —

Change in net assets $ 897 $4,496 $ —

Net Assets at December 31, 2013 $38,014 $7,519 $1,132

Increase in unrestricted net assets $ 2,568 $ — $ —

Restricted contributions, grants, and other receipts — 5,421 —

Investment income restricted for specific purposes — 169 —

Net assets released from restrictions for:  

Operating expenses — (4,708) —  

Capital asset acquisitions — (139) —

Change in net assets $ 2,568 $ 743 $ —

Net Assets on December 31, 2014 $40,582 $8,262 $1,132

Major Medical Center Statements of Cash Flows Year Ended December 31 2014 2013 (In Thousands)

Operating Activities

Operating income $ 2,429 $ 751

Change in temporarily restricted net assets 743 4,496 $ 3,172 $ 5,247

Adjustments to reconcile change in net assets to cash provided by operations:  

Depreciation and amortization 22,541 18,856  

Investment income earned on assets limited as to use (774) (698)  

Changes in operating assets and liabilities:   

(Increase) decrease in receivables for patient care (2,105) 7,589   

(Increase) decrease in due from third-party reimbursement programs (8,413) 4,500   

Increase in accounts payable and accrued expenses and accrued 

salaries and related liabilities 9,654 1,412   

Net effect of increases and decreases in other assets and liabilities 2,286 (8,707)

Cash provided by operations $ 26,361 $ 28,199

Investing Activities Acquisitions of property, plant, and equipment, net $(10,043) $(12,998)  

Less amounts provided by restricted funds 139 146

Increase in investments (618) (70)

Cash used in investing activities $(10,522) $(12,922)

Financing Activities Net payment from (to) affiliates $ 126 $ (1,773)

Increase in deferred financing costs (1,323)

Repayments of long-term debt (13,326) (9,510)

Deposits into sinking fund, as required by mortgage loan agreement (303)

Increase in compensating balances for standby letters of credit (1,923)

(Increase) decrease in pledges receivable (30) (3,190)

Cash used in financing activities $(16,779) $(14,473)

Net (decrease) increase in cash and cash equivalents $ (940) $ 804

Cash and cash equivalents at beginning of year 9,005 8,201

Cash and cash equivalents at end of year $ 8,065 $ 9,005