Please help me with the Homework. Please see the attachment

Assignment # 8 Noel Ruiz, MPA Name: Class: HSA 304 Date: Chapter 13 Assignment page 419 Problem 13.1 & 13.2 13.1.a. General Hospital has a current ratio of 0.5. Which of the following actions would improve (increase) this ratio? (Hint: Create a simple balance sheet that has a current ratio of 0.5. Then, Judge how the transactions below would affect the balance sheet). 1. Use cash to pay off current liabilities. 2. Collect some of the current accounts receivable. 3. Use cash to pay off some long-term debt. 4. Purchase additional inventory on credit (i.e., accounts payable) 5. Sell some of the existing inventory at cost (book value). b. Now assume that General Hospital has a current ratio of 1.2. In this situation, which of the above actions would improve this ratio? Insert your response here. 13.2 Southwest Physician, a medical group practice in Oklahoma City, is just being formed. It will need $2 million of total assets to generate $3 million in revenues. Furthermore, the group expects to have a total margin of 5 percent. The group is considering two financing alternatives. First, it can use all equity financing by requiring each physician to contribute his or her pro rate share. Second, the practice can finance up to 5o percent of its assets with a bank loan. Assuming that the debt alternative has no impact on the expected total margin, what is the difference between the expected return on equity (ROE) if the group finances with 50 percent debt versus the expected ROE if it finances entirely with equity capital? Insert your response here. Initial investment = $2 million Revenues = $3 million Profit margin = 5%, therefore, net profit = $3million x 5% = $150,000 1st financing option = All-equity financing (shareholder's equity = $2 million) 2nd financing option = 50% by bank loan (debt) and 50% by equity. (Total debt = $1 million & shareholder's equity = $1 million) Assumption: Debt alternative has no impact on expected profit margin Assumption: 100% dividend pay-out ratio ROE = Net income available to equity shareholders/Average shareholder's equity x 100 1st financing option ROE = $150,000/$2 million x 100 -> 7.5% 2nd financing option ROE = $150,000/$1 million x 100 -> 15% Difference in ROE = 15%-7.5% -> 7.5% Hide comments (2) Problem 13.1 i. The current ratio = o.5 Current ratio = current assets/current liabilities =1/2 General hospital Simple balance sheet Current assets 1 Add: Purchase of Inventory xx 1 + xx Current liabilities 2 Add: purchase inventory on credit xx 2 + xx Current ratio = (1 + xx)/ (2 +xx) The current ratio will have increased. ii. 1. The effect will be; cash in current assets will have reduced the total current assets and current liabilities or the pa 2. This will have no effect on the balance sheet. 3. The effect will be, cash under the current assets will reduce thus reducing the total current assets and the lo 4. The effect is that, inventory in the current assets will increase thus leading to an increase in the total current 5. This is a contra entry transaction. Cash in hand will increase and the inventory will reduce and thus the total b. current ratio = current assets/ current liabilities = 1.2 or 6/5 General hospital Simple balance sheet Current assets 6 Add: Purchase of Inventory xx 6 + xx Current liabilities 5 Add: purchase inventory on credit xx 5 + xx The transaction number 4 would increase this ratio since both the current assets and current liability is increasing with a ce assets and current liabilities or the payables will reduce reducing total current liabilities. g the total current assets and the long term loan will also reduce the total long term liabilities on the balance sheet. ng to an increase in the total current assets and creditors will also increase thus increasing the total current liabilities on the balance sh ntory will reduce and thus the total current assets remaining the same and hence no effect on the balance sheet. urrent liability is increasing with a certain amount. liabilities on the balance sheet. Problem 13.2 Total assets Revenues Total profit margin 1 financing alternative $2 millions $3 millions 5% st Use all equity financing that is shareholder's equity = $2 millions 2 alternative nd 50% of asset is financed by bank loan 50% x $2millions = $1 million This debt is assumed to have no impact on profit margin 50% of assets financed by shareholder's equity 50% x $2 million = $1 million Return on equity = net income/ equity Net income = sales revenue x profit margin = $3 million x 5% = $150,000 1 option ROE = 150,000/2,000,000 st = 0.075 = 7.5% 2 option ROE = 150,000/1,000,000 nd = 0.15 = 15% Difference in ROE = 15% - 7.5% = 7.5% Problem 13.1 i. The current ratio = o.5 Current ratio = current assets/current liabilities =1/2 General hospital Simple balance sheet Current assets 1 Add: Purchase of Inventory xx 1 + xx Current liabilities 2 Add: purchase inventory on credit xx 2 + xx Current ratio = (1 + xx)/ (2 +xx) The current ratio will have increased. ii. 1. The effect will be; cash in current assets will have reduced the total current assets and current liabilities or the pa 2. This will have no effect on the balance sheet. 3. The effect will be, cash under the current assets will reduce thus reducing the total current assets and the lo 4. The effect is that, inventory in the current assets will increase thus leading to an increase in the total current 5. This is a contra entry transaction. Cash in hand will increase and the inventory will reduce and thus the total b. current ratio = current assets/ current liabilities = 1.2 or 6/5 General hospital Simple balance sheet Current assets 6 Add: Purchase of Inventory xx 6 + xx Current liabilities 5 Add: purchase inventory on credit xx 5 + xx The transaction number 4 would increase this ratio since both the current assets and current liability is increasing with a ce assets and current liabilities or the payables will reduce reducing total current liabilities. g the total current assets and the long term loan will also reduce the total long term liabilities on the balance sheet. ng to an increase in the total current assets and creditors will also increase thus increasing the total current liabilities on the balance sh ntory will reduce and thus the total current assets remaining the same and hence no effect on the balance sheet. urrent liability is increasing with a certain amount. liabilities on the balance sheet. Problem 13.2 Total assets Revenues Total profit margin 1 financing alternative $2 millions $3 millions 5% st Use all equity financing that is shareholder's equity = $2 millions 2 alternative nd 50% of asset is financed by bank loan 50% x $2millions = $1 million This debt is assumed to have no impact on profit margin 50% of assets financed by shareholder's equity 50% x $2 million = $1 million Return on equity = net income/ equity Net income = sales revenue x profit margin = $3 million x 5% = $150,000 1 option ROE = 150,000/2,000,000 st = 0.075 = 7.5% 2 option ROE = 150,000/1,000,000 nd = 0.15 = 15% Difference in ROE = 15% - 7.5% = 7.5%