Use the results of your ratio analysis to classify the derived ratios as favorable or unfavorable as to trend and standard. Be prepared to answer variants of the questions below. Justify your answers based upon the results of the ratio analysis by citing ratio(s), your comparisons of results against standards, and your interpretations of trends.

1. Is Stevens Hospital profitable?

2. Does the hospital use its assets to generate revenue efficiently?

3. Does Stevens Hospital have a problem with its long-term debt posture? If you were a mortgage lender, would you lend money to Stevens Hospital?

4. Can Stevens Hospital meet its current liabilities?

5. If you were a medical supplier, would you sell to this hospital on credit?

6. Does Stevens Hospital have a problem with revenue cycle management?

7. Interpret the difference between the values for Total Margin% and Operating Margin %.

8. Stevens Hospital is the public hospital for District No. 2 of Snohomish County, Washington. As such a significant portion of the nonoperating revenues listed in the Income Statement are generated by taxes. Discuss the advantages and disadvantages of being supported by taxes.

Indicator Stevens Hospital Ratio Analysis Ratio Computations 2008 2007 Trend Standard Industry Standards S&PA Rated Hosp Profitability Total Margin% 3.21 1.68 NA DF NA Excess margin% 3.29 1.73 3.70% FU (1.02) NA FNA Operating margin % Return on net assets (equity) % 18.92 11.41 4.70% Liquidity Current ratio 1.34 2.09 Days in Patient Accounts Receivable 50.71 60.64 Days cash on hand, short-term sources 23.80 Days cash on hand, all sources 23.85 40.94 85.93 23.07 31.53 70.09 104.60 FU Average payment period D 47.50 Capital Structure (Debt Management) Net asset financing % 28.86 23.22 59.50% F U Long-term debt to capitalization % 47.29 63.111 28.30% FU Debt service coverage 1.60 | 14 | | | | | 1.74 13.13 Cash flow to debt % 18.50 19.50 | F | | | Asset Efficiency (Activity) Total Asset Turnover 0.90 Fixed Asset Tumover 4.25 FF Current Asset Tumover 3.721 4.11 UU Average Age of Plant NA NA 8.09 NA NA Inventory Tumover 66.44 63.57 7.5 T F | | |