Healthcare Finance (6th Edition) Chapter 17, Problem 7P

17.7 Recent financial statements for The Heart Hospital are provided below: The Heart Hospital, Balance Sheet, September 30, 2015 (in thousands) Current assets: Cash $14,202 Accounts receivable, net 5,918 Medical supplies inventory 1,211 Prepaid expenses and other current assets 1,429 Total current assets $22,760 Property, plant, and equipment, net $33,769 Other assets 901 Total assets $57,430 Current liabilities: Accounts payable $ 1,910 Accrued compensation and benefits 2,543 Other accrued liabilities 1,843 Current portion of long-term debt 2,064 Total current liabilities $ 8,360 Long-term debt 21,640 Total liabilities $30,000 Owners' equity $27,430 Total liabilities and owners' equity $57,430 The Heart Hospital, Statement of Operations, Year Ended September 30, 2015 (in thousands) Patient service revenue net of discounts and allowances $66,962 Provision for bad debt ( 2,457) Net patient service revenue $64,505 Operating expenses: Personnel expense Medical supplies expense Other operating expenses Depreciation expense Total operating expenses Income from operations Other income (expenses): Interest expense Interest and other income, net Total other income (expenses), net Net income $21,707 15,047 9,721 2,625 $49,100 $15,405 ($ 1,322) 159 ($ 1,163) $14,242 a. Perform a Du Pont analysis on The Heart Hospital. Assume that the industry average ratios are as follows: Total margin Total asset turnover Equity multiplier Return on equity (ROE) 15.0% 1.5 1.67 37.6% b. Calculate and interpret the following ratios for The Heart Hospital: Return on assets (ROA) Current ratio Days cash on hand Average collection period Debt ratio Debt-to-equity ratio Times interest earned (TIE) ratio Fixed asset turnover ratio Industry Average 22.5% 2.0 85 days 20 days 40% 0.67 5.0 1.4