Swift Community Hospital, a 310 bed facility, is a sole provider hospital in a rural New England area servicing a large market. Recently, a wealthy philanthropist made a major contribution to the hospital's long-term investment fund.

1. Assess Swift's profitability, liquidity, activity, and capital structure ratios. using the financial ratios from exhibit 4.25 for the current and previous years, evaluate swifts financial condition and also compare its ratios to national industry benchmarks for its bed size using the data from exhibit 4.16a

exhibit 25

EXHIBIT 4.16a FINANCIAL RATIOS FOR ALL U.S. HOSPITALS BY BED SIZE Optum & CMS Ratio Median Ratio Hospital Industry 1-99 Beds 200-299 100-199 Beds 300-399 Beds Beds Desired Liquidity ratios 400 + Beds Position Current ratio Quick ratio 2.17 2.63 1.77 1.62 1.53 1.64 2.25 1.80 1.35 1.45 Above Acid test ratio 1.44 Days in accounts receivable 0.50 0.52 1.48 0.37 0.62 Above 0.47 47 0.39 43 Above Days' cash on hand 48 43 41 44 101 Average payment period, days 116 80 Below 99 56 105 65 153 49 68 Above 63 64 Below Revenue, expense, and profitability ratios Operating revenue per adjusted discharge Operating expense per adjusted discharge $9,845 $8,204 $10,650 $9,778 $11,904 $9,125 $12,431 $14,655 $10,223 Above Salary and benefit expense as a $11,381 42% $12,234 $14,816 percentage of operating expense 43% Below 37% 38% 38% 38% Below Operating margin 0.04 Nonoperating revenue -0.01 0.02 0.02 0.03 0.04 0.06 Return on total assets 0.01 Above 0.02 0.06 0.03 0.03 0.19 Return on net assets 0.02 0.05 Varies 0.07 0.03 0.04 0.09 0.05 Above 0.08 0.08 0.10 0.09 Above Activity ratios Total asset turnover ratio 1.11 1.14 Net fixed assets turnover ratio 1.00 1.08 2.00 0.96 0.92 Age of plant ratio 1.91 Above 1.93 11.79 2.01 10.63 2.03 1.98 12.35 Above 9.84 12.17 9.50 Below Capital structure ratios ong-term debt to net assets ratio 0.33 0.30 Net assets to total assets ratio 0.16 0.72 0.58 0.49 0.51 0.54 Below imes interest earned ratio 0.54 0.41 0.46 0.43 4.30 3.94 Above Debt service coverage ratio 5.16 4.35 5.11 5.77 3.82 3.14 Above 4.27 4.18 4.00 4.34 Above I ratio values, except for quick, acid test, times interest earned, and debt service coverage ratios, were obtained from: Optum Insight"2018 Almanac of Hospital Financial and Operating Indi 16 median value data. The quick, acid test, times interest earned, and debt service coverage ratios were computed from 2016 CMS cost report data. ese are true to a certain point. For example, in general the higher the better for the current ratio, but after a certain point, the organization might be better off investing some of the excess198 CHAPTER 4 FINANCIAL STATEMENT ANALYSIS EXHIBIT 4.25 SELECTED FINANCIAL RATIOS FOR SWIFT COMMUNITY HOSPITALSIX Ratio IXOS 20X1 20XO Liquidity ratios -poker vilblupli Current ratio OK.S 3.51 olti 2.01 Quick ratio $2.0 2.89 01761 1.65 Acid test ratio ea 0.99 slowvisas1 amuoso0.35 Days in accounts receivable 40 130 basit no das 540 Days' cash on hand 200 (evsb) bolted inemysq s 50 VA Average payment period (days) 45 55 Profitability ratios 000.Se spierbelb beleujbs ing sunsver paltsisqo Operating margin apier 0.02 eteulbeing sansgas p 0.010 Nonoperating revenue serieqxs pnitsrego lero: 0.45strisaifq s as mened be 0.08 2 Return on assets BO.0 0.17 nipism p 0.05 go Activity ratios 510 ators Istof no millen Total asset turnover ratio 0.89 204151 0.94 Fixed asset turnover ratio 1.95 0361 19vomut 1 2.05 OF Age of plant ser 13.01 QUET ISVOMU1 1 10.95 Capital structure ratios insiq to SPA Long-term debt to net assets 0.27 Net assets to total assets 0.67 160161 917132 0.56 Debt service coverage ratio Yupsolidab mi 0.40.) 3.80 219226 10101 2.34 00.A oust apslavo: 53/v192 1dad 13:09