Ratio analysis. The statement of operations and balance sheet for Longwood Community Hospital for the years ended 20X0 and 20X1 are shown in Exhibits 4.19a and 4.19b. Compute the following ratios for both years: current, acid test, days in accounts receiv- able, average payment period, long-term debt to net assets, net assets to total assets, total asset turnover, fixed asset turnover, operating revenue per adjusted discharge, oper- ating expense per adjusted discharge, salary and benefit expense as a percentage of total operating expense, return on total assets, and operating margin. After calculating the ratios, comment on Longwoods liquidity; efficient use of assets or activity ratios; revenue, expense, and profitability; and capital structure relative to its industry benchmarks for its respective bed size (listed in Exhibit 4.16a). Cite at least two meaningful ratios per category. Assume for this analysis that Longwood is a 350-bed facility and its adjusted discharges were 5,500 for 20X0 and 5,400 for 20X1.

EXHIBIT 4.19a STATEMENT OF OPERATIONS FOR LONGWOOD COMMUNITY HOSPITAL Longwood Community Hospital Statement of Operations for the Years Ended December 31, 20X1 and 20X0 (in thousands) 20X1 20X0

Revenues 20x1 20x0

Net patient service revenue $54,000 $53,000

Other revenue $1,000 500

Total operating revenues 55,000 53,500

Expenses

Salaries and benefits 23,000 22,000

Supplies and other expenses 20,000 23,000

Depreciation 10,000 9,000

Total operating expenses 53,000 54,000

Operating income 2,000 (500)

Excess of revenues over expenses 2,000 (500)

Increase (decrease) in net assets $2,000 ($500)

EXHIBIT 4.16b FORMULAS FOR KEY FINANCIAL RATIOS

Liquidity ratios Formula Revenue, expense, and profitability ratios Activity ratios Capital structure ratios Formula Formula Formula Current ratio Quick ratio Acid test ratio Days in accounts receivable Days cash on hand Average payment period, days Current Assets / Current Liabilities (Cash + Marketable Securities + Net Receivables) / Current Liabilities (Cash + Marketable Securities) / Current Liabilities Net Patient Accounts Receivables / (Net Patient Revenues / 365) (Cash + Marketable Securities + Long-Term Investments) / [(Operating Expenses Depreciation and Amortization Expenses) / 365] Current Liabilities / [(Operating Expenses Depreciation and Amortization Expenses) / 365] Operating revenues per adjusted dischargea Operating expense per adjusted dischargea Salary and benefit expense as percentage of operating expense Operating margin Nonoperating revenue ratio Return on total assetsb Return on net assetsc Total Operating Revenues / Adjusted Discharges Total Operating Expenses / Adjusted Discharges Total Salary and Benefit Expense / Total Operating Expenses Operating Income / Total Operating Revenues Nonoperating Revenues and Other Income / Total Operating Revenues Excess of Revenues over Expenses / Total Assets Excess of Revenues over Expenses / Net Assets Total asset turnover ratio Net fixed assets turnover ratio Age of plant ratio Total Operating Revenues / Total Assets Total Operating Revenues / Net Plant and Equipment Accumulated Depreciation / Depreciation Expense Long-term debt to net assets ratiod Net assets to total assets ratioe Times interest earned ratiof Debt service coverage ratiog Long-Term Debt / Net Assets Net Assets / Total Assets (Excess of Revenues over Expenses + Interest Expense) / Interest Expense (Excess of Revenues over Expenses + Interest Expense + Depreciation and Amortization Expenses) / (Interest Expense + Principal Payment