Question 1: Example 14A: Common Sizing

Common sizing converts numbers to percentages so that comparative analysis can be performed. Reread the chapter text about common sizing and examine the percentages shown in Table 141.

Practice Exercise 141: Common Sizing

The worksheet below shows the assets of two hospitals.

Perform common sizing for the assets of the two hospitals.

Same Year for Both Hospitals

Hospital A Hospital B

Current Assets $2,000,000 $8,000,000

Property, Plant, and Equipment 7,500,000 30,000,000

Other Assets 500,000 2,000,000

_______________________

Total Assets $10,000,000 $40,000,000

Solution to Practice Exercise 141

Common sizing for the assets of the two hospitals appear on the worksheet below. Note that their gross numbers are very different, yet the proportionate relationships of the percentages (20 percent, 75 percent, and 5 percent) are the same for both hospitals.

Same Year for Both Hospitals

Hospital A Hospital B

Current Assets $ 2,000,000 20% $ 8,000,000 20%

Property, Plant, and Equipment 7,500,000 75% 30,000,000 75%

Other Assets 500,000 5% 2,000,000 5%

_________________________________________

Total Assets $10,000,000 100% $40,000,000 100%

Now it's Your Turn! Assignment Exercise 141: Common Sizing

Refer to the Metropolis Health System (MHS) comparative financial statements at the back of the Examples and Exercises section.

Common size the MHS Statement of Revenue and Expenses.

Question 1: Example 14A: Common Sizing

Common sizing converts numbers to percentages so that comparative analysis can be performed. Reread the chapter text about common sizing and examine the percentages shown in Table 141.

Practice Exercise 141: Common Sizing

The worksheet below shows the assets of two hospitals.

Perform common sizing for the assets of the two hospitals.

Same Year for Both Hospitals

Hospital A Hospital B

Current Assets $2,000,000 $8,000,000

Property, Plant, and Equipment 7,500,000 30,000,000

Other Assets 500,000 2,000,000

_______________________

Total Assets $10,000,000 $40,000,000

Solution to Practice Exercise 141

Common sizing for the assets of the two hospitals appear on the worksheet below. Note that their gross numbers are very different, yet the proportionate relationships of the percentages (20 percent, 75 percent, and 5 percent) are the same for both hospitals.

Same Year for Both Hospitals

Hospital A Hospital B

Current Assets $ 2,000,000 20% $ 8,000,000 20%

Property, Plant, and Equipment 7,500,000 75% 30,000,000 75%

Other Assets 500,000 5% 2,000,000 5%

_________________________________________

Total Assets $10,000,000 100% $40,000,000 100%

Now it's Your Turn! Assignment Exercise 141: Common Sizing

Refer to the Metropolis Health System (MHS) comparative financial statements at the back of the Examples and Exercises section.

Common size the MHS Statement of Revenue and Expenses.

Question 2: Example 14B: Trend Analysis

Trend analysis allows comparison of figures over time. Reread the chapter text about trend analysis and examine the difference columns shown in Table 143.

Practice Exercise 142: Trend Analysis

The worksheet below shows the assets of Hospital A over two years.

Perform trend analysis for the assets of Hospital A.

Hospital A

Year 1 Year 2

Current Assets $1,600,000 $ 2,000,000

Property, Plant, and Equipment 6,000,000 7,500,000

Other Assets 400,000 500,000

Total Assets $8,000,000 $10,000,000

Solution to Practice Exercise 142

Hospital A

Year 1 Year 2 Difference

Current Assets $1,600,000 $ 2,000,000 $ 400,000 25%

Property, Plant, and Equipment 6,000,000 7,500,000 1,500,000 25%

Other Assets 400,000 500,000 100,000 25%

Total Assets $8,000,000 $10,000,000 $2,000,000

Note: The worksheet below shows Hospital A with both common sizing and trend analysis:

Hospital A

Year 1

Year 2

Difference

Current Assets

$1,600,000

20%

$2,000,000

20%

$400,000

25%

Property, Plant, and Equipment

6,000,000

75%

7,500,000

75%

1,500,000

25%

Other Assets

400,000

5%

500,000

5%

100,000

25%

Total Assets

$8,000,000

100%

$10,000,000

100%

$2,000,000

Now it's Your Turn: Assignment Exercise 142: Trend Analysis

Refer to the Metropolis Health System (MHS) comparative financial statements at the back of the Examples and Exercises section.

Perform trend analysis on the MHS Statement of Revenue and Expenses.

Metropolis Health System Balance Sheet March 31, 20X3 and 20X2 Lects Current Assets $1,150,000 825,000 8,700,000 (1,300,000) 150,000 900,000 200,000 10,625,000 $400,000 825,000 8,950,000 (1,300,000) 100,000 850,000 150,000 9,975.000 Cash and cash equivalents Assets whose use is limited Patient accounts receivable Less allowance for bad debts Other receivables Inventories of supplies Prepaid expenses Total Current Assets Assets Whose Use Is Limited Corporate funded depreciation Under bond indenture agreements- held by trustee Total Assets Whose Use Is Limited Less Current Portion Net Assets Whose Use Is Limited Property, Plant, and Equipment, Net 1,950,000 1.800.000 1,475,000 1,425,000 3,375,000 (825,000) 2,550,000 19.300.000 3,275,000 (825,000) 2.450.000 19,200,000 375,000 $32,000,000 Other Assets 325,000 $32,800,000 Total Assets Metropolis Health System Balance Sheet March 31, 20X3 and 20X2 Lects Current Assets $1,150,000 825,000 8,700,000 (1,300,000) 150,000 900,000 200,000 10,625,000 $400,000 825,000 8,950,000 (1,300,000) 100,000 850,000 150,000 9,975.000 Cash and cash equivalents Assets whose use is limited Patient accounts receivable Less allowance for bad debts Other receivables Inventories of supplies Prepaid expenses Total Current Assets Assets Whose Use Is Limited Corporate funded depreciation Under bond indenture agreements- held by trustee Total Assets Whose Use Is Limited Less Current Portion Net Assets Whose Use Is Limited Property, Plant, and Equipment, Net 1,950,000 1.800.000 1,475,000 1,425,000 3,375,000 (825,000) 2,550,000 19.300.000 3,275,000 (825,000) 2.450.000 19,200,000 375,000 $32,000,000 Other Assets 325,000 $32,800,000 Total Assets