The Heart Hospital The Heart Hospital Statement of Operations Balance Sheet Year ended September 30, 2015 September 30, 2015 (in thousands) (in thousands) Patient service revenue net of discounts and allowances $66,962 Current assets: Provision for bad debt (2,457) Cash $ 14,202 Net patient service revenue $64,505 Accounts receivable, net 5,918 Medical supplies inventory 1,211 Operating expenses: Prepaid expenses and other current assets 1,429 Personnel expense $21,707 Total current assets $ 22,760 Medical supplies expense 15,047 Property, plant and equipment, net 33,769 Other operating expenses 9,721 Other assets 901 Depreciation expense 2,625 Total assets $ 57,430 Total operating expenses $49,100 Income from operations $15,405 Current Liabilities: Accounts payable $1,910 Other income (expenses): Accrued compensation and benefits 2,543 Interest expense $(1,322) Other accrued liabilities 1,843 Interest and other income, net 159 Current portion of long term debt 2,064 Total other income (expenses), net $(1,163) Total current liabilities $8,360 Net Income $14,242 Long-term debt 21,640 Total liabilities $ 30,000 Owners' equity 27,430 Total liabilities and owners' equity $ 57,430 a. Perform a DuPont analysis on The Heart Hospital. Industry Averages Heart Hospital Total margin 15% Total asset turnover 1.5 Equity multiplier 1.67 Return on equity (ROE) 37.6% b. Calculate and interpret the following ratios for The Heart Hospital: Industry Averages Heart Hospital Return on assets (ROA) 22.50% Current ratio 2.0 Days cash on hand 85 days Average collection period 20 days Debt ratio 40% Debt-to-equity ratio 0.67 Times interest earned (TIE) ratio 5.0 Fixed asset turnover ratio 1.4 Interpretation:

The Heart Hospital Statement of Operations Year ended September 30, 2015 (in thousands) Patient service revenue net of discounts and allowances Provision for bad debt Net patient service revenue Operating expenses: Personnel expense Medical supplies expense Other operating expenses Depreciation expense Total operating expenses Income from operations Other income (expenses): Interest expense Interest and other income, net Total other income (expenses), net Net Income $66,962 (2,457) $64,505 $21,707 15,047 9,721 2,625 $ 49,100 $15,405 $ (1,322) 159 $ (1,163) $14,242 a. Perform a DuPont analysis on The Heart Hospital. Total margin Total asset turnover Equity multiplier Return on equity (ROE) Industry Heart Averages Hospital 15% 1.5 1.67 37.6% b. Calculate and interpret the following ratios for The Heart Hospital: Return on assets (ROA) Current ratio Days cash on hand Average collection period Debt ratio Debt-to-equity ratio Times interest earned (TIE) ratio Fixed asset turnover ratio Industry Heart Averages Hospital 22.50% 2.0 85 days 20 days 40% 0.67 5.0 1.4 Interpretation: The Heart Hospital Balance Sheet September 30, 2015 (in thousands) Current assets: Cash $ Accounts receivable, net Medical supplies inventory Prepaid expenses and other current assets Total current assets $ Property, plant and equipment, net Other assets Total assets $ Current Liabilities: Accounts payable Accrued compensation and benefits Other accrued liabilities Current portion of long term debt Total current liabilities Long-term debt Total liabilities Owners' equity Total liabilities and owners' equity 14,202 5,918 1,211 1,429 22,760 33,769 901 57,430 $ 1,910 2,543 1,843 2,064 $ 8,360 21,640 $ 30,000 27,430 $ 57,430