Use Additional Information from 10-K to Explain Linkages Among Financial Statements Community Health Systems operates general acute care hospitals in communities across the United States. The company reports the following information in Schedule II of its 2017 10K.

SCHEDULE IIVALUATION AND QUALIFYING ACCOUNTS
	Balance at	Acquisitions	Bad		Balance
	Beginning	and	Debt	Write-	at End
$ millions	of Year	Dispositions	Expense	Offs	of Year
December 31, 2017, allowance for doubtful accounts	$3,773	$(21)	$3,054	$(2,936)	$3,870
December 31, 2016, allowance for doubtful accounts	4,110	(365)	2,849	(2,821)	3,773
December 31, 2015, allowance for doubtful accounts	3,504	(17)	3,168	(2,545)	4,110

Accounts receivable represents the amount customers owe Community Health Systems for services rendered. The balance in the allowance for doubtful accounts is the companys best estimate of the amount that customers will not repay. Community Health Systems' balance sheet and income statement reported the following.

$ millions	2017	2016	2015
Revenue	$18,398	$21,275	$22,564
Operating income (loss) before tax	(1,878)	(860)	1,337
Total assets	17,450	21,944	26,861

a. 1. Compute the commonsize allowance for doubtful accounts for each year.

Note: Round percentage to one decimal point (for example, round 18.566% to 18.6%).

	2017	2016	2015
Common size allowance

2. What conclusion may be drawn by analysts in comparing the common-size allowance in 2017 to the previous years? AnswerCollecting cash from customers now is more difficultCollecting cash from customers now is easierThere's relative no change in cash collections b. On average, the firms in the S&P 500 report commonsize allowance for doubtful accounts between 3% and 5%. Why might Community Health Systems ratio be so much higher? Community Health Systems now has: Answerrelatively more charges to patients not expected to pay in fullrelatively less charges to patients not expected to pay in full c. 1. Compute the commonsize bad debt expense for each year.

Note: Round percentage to one decimal point (for example, round 18.566% to 18.6%).

	2017	2016	2015
Common size allowance

2. What trend is implied by the common-size analysis of bad debt expense? Community Health Systems has: Answerless bad debt for every dollar of revenuemore bad debt for every dollar of revenuethe same rate of bad debt for every dollar of revenue d. If the company had recorded bad debt expense of $2,554 in 2017 (which is $500 less than actually recorded), which of the following would be true? (Ignore taxes for this question.) 1. AnswerTrueFalse The company would have reported operating loss of $1,378 and cash flow would have been $500 higher. 2. AnswerTrueFalse The company would have reported operating loss of $2,378 and cash flow would have been $500 higher. 3. AnswerTrueFalse The company would have reported operating loss of $1,378 and cash flow would have been unchanged. 4. AnswerTrueFalse The company would have reported operating loss of $1,878 and cash flow would have been unchanged.