17.7 Recent financial statements for The Heart Hospital are provided below: The Heart Hospital, Balance Sheet,...

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17.7 Recent financial statements for The Heart Hospital are provided below: The Heart Hospital, Balance Sheet, September 30, 2015 (in thousands) Current assets: Cash $14,202 Accounts receivable, net 5,918 Medical supplies inventory 1,211 Prepaid expenses and other current assets 1,429 Total current assets $22,760 Property, plant, and equipment, net $33,769 Other assets 901 Total assets $57,430 Current liabilities: Accounts payable $ 1,910 Accrued compensation and benefits 2,543 Other accrued liabilities 1,843 Current portion of long-term debt 2,064 Total current liabilities $ 8,360 Long-term debt 21,640 Total liabilities $30,000 Owners' equity $27,430 Total liabilities and owners' equity $57,430 The Heart Hospital, Statement of Operations, Year Ended September 30, 2015 (in thousands) Patient service revenue net of discounts and allowances $66,962 Provision for bad debt Net patient service revenue ( 2,457) $64,505 Operating expenses: Personnel expense $21,707 Medical supplies expense 15,047 Other operating expenses 9,721 Depreciation expense 2,625 Total operating expenses $49,100 Income from operations $15,405 Other income (expenses): Interest expense ($ 1,322) Interest and other income, net 159 Total other income (expenses), net ($ 1,163) $14,242 Net income a. Perform a Du Pont analysis on The Heart Hospital. Assume that the industry average ratios are as follows: Total margin 15.0% 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 Average Return on assets (ROA) 22.5% 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 17.7 Recent financial statements for The Heart Hospital are provided below: The Heart Hospital, Balance Sheet, September 30, 2015 (in thousands) Current assets: Cash $14,202 Accounts receivable, net 5,918 Medical supplies inventory 1,211 Prepaid expenses and other current assets 1,429 Total current assets $22,760 Property, plant, and equipment, net $33,769 Other assets 901 Total assets $57,430 Current liabilities: Accounts payable $ 1,910 Accrued compensation and benefits 2,543 Other accrued liabilities 1,843 Current portion of long-term debt 2,064 Total current liabilities $ 8,360 Long-term debt 21,640 Total liabilities $30,000 Owners' equity $27,430 Total liabilities and owners' equity $57,430 The Heart Hospital, Statement of Operations, Year Ended September 30, 2015 (in thousands) Patient service revenue net of discounts and allowances $66,962 Provision for bad debt Net patient service revenue ( 2,457) $64,505 Operating expenses: Personnel expense $21,707 Medical supplies expense 15,047 Other operating expenses 9,721 Depreciation expense 2,625 Total operating expenses $49,100 Income from operations $15,405 Other income (expenses): Interest expense ($ 1,322) Interest and other income, net 159 Total other income (expenses), net ($ 1,163) $14,242 Net income a. Perform a Du Pont analysis on The Heart Hospital. Assume that the industry average ratios are as follows: Total margin 15.0% 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 Average Return on assets (ROA) 22.5% 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

Answer rating: 100% (QA)

Based on the provided balance sheet for The Heart Hospital as of September 30 2015 the following inf... View the full answer