Questions

1. Using Figure 12-1 (Examples of Liquidity Ratio Calculations, page 131) and Figure 12-2 Examples of Solvency and Profitability Ratio Calculations, page 133) define and show your understanding of the following terms:

A.Liquidity Ratios (Current Ratio, Quick Ratio, Days Cash on Hand, Days Receivables)

B. Solvency - Capital Structure Ratios (Debt Service Coverage Ratio)

C. Profitability Ratios (Operating Margin, Return on Total Assets).

You must include specific words to define terms; specific dollar values and a discussion showing an understanding of the term.

Example of answer for Question 1 (A) Liquidity Ratios: Current Ratio

Liquidity is defined as a measurement of the ability for a facility to meets its cash obligations as they become due. Liquidity ratios are measurements of short-term sufficiency. The ability to turn assets into cash. The ratios found in this category show us how well a facility can meet its financial obligations as they are due.

The ratios include (1) Current Ratio, (2) Quick Ratio, (3) Days Cash On Hand, and (4) Days In Accounts Receivable.

Current Ratio measuresthe dollars of current assets per dollar of current liabilities. Healthcare managers, utilize current ratio to quantify the relationship between assets and liabilities is considered a measure of short term debt-paying ability. It determines how quickly the assets can be converted into cash. A facility with a higher proportion of current assets to current liabilities is in a better position to pay upcoming obligations than a facility with a lower ratio of current assets to current liabilities.

Current ratio is calculated by current assets divided by current liabilities:

As the example shown in figure 12-1, page 131 of the text: Current Assets ($470,000 divided by Current Liabilities ($345,000) equals 1.362 or 1.36 to 1.

A current ratio of "1.36 indicates that there is $1.36 of current assets available to pay each dollar of current liabilities.

2 Using the Finance Indicator Review Sheet determine the financial healthiness of NYU based on the ratios and comparison with nearest competitor.

Students need to include

A . word definitions of all finance terms

B. a discussion of specific dollar amounts or percentages from the table from each category (all line items n each category need not be discussed. Only those that you find significant to affect financial healthiness):

• Balance Sheets and Income Statement Indicators
• Profitability Ratios
• Liquidity Ratios
• Assets Management Ratios
• Other Ratios
• Efficiency and Operations Measures
• Volume Indicators
• Intensity of Service Indicators

3. Use and understanding of benchmarks where indicated.