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Ratio Optum & CMS Median Ratio Hospital Industry 1-99 beds 100-199 beds 200-299 beds 300-399 beds 400+ beds Desired position Liquidity Ratios Current ratio 2.11

Ratio

Optum & CMS Median Ratio Hospital Industry

1-99 beds

100-199 beds

200-299 beds

300-399 beds

400+ beds

Desired position

Liquidity Ratios

Current ratio

2.11

2.18

2.04

1.88

1.71

1.84

Above

Quick ratio

1.52

1.65

1.39

1.27

1.42

1.50

Above

Acid test ratio

0.30

0.35

0.18

0.20

0.20

0.38

Above

Days in account rec.

49

47

45

44

48

44

Below

Days cash on hand

86

85

81

102

76

119

Above

Average pmt period, days

50

45

51

56

53

52

Below

Revenue, expense, and profitability ratios

Operating revenue per adjusted

$7,448

$7,086

$6,407

$6,766

$7,121

$7,517

Above

Operating expense per adjusted

$7,197

$6,494

$6,112

$6,260

$6,819

$7,399

Below

Salary and benefit expense as a percentage of operating expense

40%

40%

38%

38%

38%

38%

Below

Operating Margin

0.03

0.02

0.03

0.04

0.04

0.04

Above

Nonoperating revenue

0.04

0.05

0.03

0.05

0.07

0.17

Varies

Return on total assets

0.04

0.04

0.04

0.04

0.05

0.05

Above

Return on nets assets

0.08

0.08

0.08

0.09

0.10

0.09

Above

Activity ratios

Total asset turnover ratio

1.07

1.19

1.03

0.99

1.03

1.06

Above

Net assets turnover ratio

2.12

2.17

2.03

2.11

2.04

2.21

Above

Age of plant ratio

10.31

10.41

10.12

11.97

10.93

11.19

Below

Capital structure ratios

Long-term debt to net assets ratio

0.21

0.18

0.31

0.42

0.38

0.59

Below

Net assets to total assets ratio

0.54

0.58

0.51

0.47

0.52

0.48

Above

Times interest earned ratio

3.78

3.47

3.43

3.64

4.43

5.13

Above

Debt service coverage ratio

3.18

3.51

3.63

3.50

6.36

4.24

Above

. Horizontal, vertical, and ratio analyses. Exhibits 4.29a and 4.29b show the statement of operations and balance sheet for Resort Hospital for 20X1 and 20X0. The debt principal payment each year for Resort is $1,300,000, and its adjusted discharges are 6,500 for 20X0 and 5,500 for 20X1.

a.Perform horizontal and vertical analyses on the balance sheet using the statement of operations.

b. Perform horizontal and vertical analyses using the balance sheet.

c. Compute all the selected ratios listed in Exhibit 4.16a.

Evaluate the financial state of Resort Hospital, a 60-bed facility, using all of the above measures. Make the basis for the vertical analysis the year 20X0.

Resort Hospital

Statement of Operations for the Years Ended December 31, 20X1 and 20X0 (in thousands)

Particulars

20x1

20x0

Revenues

Net patient service revenue

$33,500

$30,500

Other operating revenue

2,600

2,500

Total operating revenues

36,100

33,000

Expenses

Salaries and benefits

23,500

19,600

Supplies and other expenses

11,400

10,500

Depreciation

700

700

Interest

710

710

Total operating expenses

36,310

31,510

Operating income

(210)

1,490

Nonoperating revenue

6,500

1,200

Excess of revenue over expenses

$6,290

$2,690

Exhibit 4.27b Balance Sheet for Resort Hospital

Particulars

20x1

20x0

Current assets

Cash and cash equivalents

$1,500

$2,500

Net patient A/R

6,500

4,800

Inventories

400

350

Prepaid expense

350

250

Total current assets

8,750

7,900

Plant, property, and equipment

Gross plant, property, and equipment

22,000

19,500

Less Accumulated depreciation)

(12,700)

(12,000)

Net property, plant, and equipment

9,300

7,500

Long-term investments

16,500

10,500

Total assets

$34,550

$25,900

Current liabilities

Account Payable

$5,300

$3,800

Salaries payable

1,000

900

Total current liabilities

6,300

4,700

Long-term liabilities

Bonds payable

1,200

2,500

Total long-term liabilities

1,200

2,500

Net assets

27,050

18,700

Total liabilities and assets

$34,550

$25,900

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