3 Case 4.3. Using Excel to Assess the Debt to Assets Ratio PROBLEM Goodfellow & Perkins LLP is a successful mid-tier accounting firm with a large range of 6 clients across Texas. During 2025, Goodfellow & Perkins gained a new client, Brookwood Pines 7 Hospital (BPH), a private, not-for-profit hospital. The fiscal year-end for BPH is June 30. 8 Goodfellow & Perkins is performing the audit for the fiscal year-end June 30, 2026. The 9 balance sheets as of June 30, 2026 and 2025 are presented here. 234567893 10 11 12 13 14 15 Assets 16 Cash and cash equivalents 17 Short term investments 18 Patient accounts receivable, net 19 Current portion of pledges and grants Brookwood Pines Hospital Balance Sheet (in thousands) June 30 2026 2025 $ 43,077 $ 36,361 22,725 49,338 119,380 99,962 9,208 5,099 222 receivable, net Current portion of insurance recoverable 2,364 1,953 Inventory 10,740 10,056 23 Other current assets 25,792 23,193 24 Total current assets 233,286 225,962 25 26 Long-term investments 915,088 807,321 27 Property and equipment, net 576,432 538,981 28 Prepaid pension cost 19,760 7,248 29 Insurance recoverable, less current portion 11,619 10,723 30 Other assets, net 31,535 28,463 31 Total assets $ 1,787,720 $ 1,618,698 32 33 Liabilities and net assets 34 Accounts payable 35 Accrued salaries and benefits 36 Grants payable, current portion 37 Accrued expenses and other current liabilities 38 Due to third-party payors 39 Current accrued liabilities under self- $ 38,431 $ 39,547 52,361 50,754 6,459 8,459 19,209 27,380 72,494 67,687 15,709 14,965 40 insurance programs Paste Cut Copy 130 Calibri (Body) BIU 11 AA A Format fx B 101 Wra Mer A C D E 40 insurance programs 41 Current maturities of long-term debt 5,040 4,928 42 Short-term debt 14,550 43 Long-term debt subject to short-term 53,132 44 refinancing agreements 45 Total current liabilities 224,253 266,852 46 47 Long-term debt, net, less current liabilities 220,796 179,530 48 Accrued liabilities under self-insurance 82,618 82,559 49 programs, less current portion 50 Grants payable, less current portion 13,245 16,489 51 Other liabilities 42,669 48,336 52 Total liabilities 583,581 593,766 53 54 Net assets 55 Without donor restrictions 1,138,140 56 With donor restrictions 57 Total net assets 962,652 62,280 1,024,932 58 Total liabilities and net assets 59 60 65,999 1,204,139 $ 1,787,720 $ 1,618,698 BPH provides medically necessary care to patients, regardless of their ability to pay. Both 61 uninsured and underinsured patients are offered discounts of up to 100% of charges based 62 on their income as a percentage of the federal poverty-level guidelines. BPH does not pursue 63 collection of these accounts; therefore, they are not reported in patient service revenue and 64 accounts receivable. The cost of providing the charity care is included in operating expenses. 65 66 BPH's investments consist of mutual funds, common equities, corporate and U.S. 67 government debt issues, state and municipal government debt issues, and trusts. A majority 68 of the investments are the result of charitable contributions to the hospital by generous 69 donors. Earnings from the investments are used to cover the costs of the charity care. BPH is 70 also eligible for certain government grants to help cover the costs of the charity care. Selected 71 financial statements and other financial information are provided below. Since BPH operates 72 as a non-for-profit, it reports assets, liabilities, and net assets. (Note: Net assets takes the 73 place of equity since there are no owners.) 74 75 AA A Wrap Text Custom INNOMerge & Center 5-%9 F G H L M N Student Work Area Required: Provide input into cells shaded in yellow in this template. Use mathematical formulas with cell references to the Problem and work areas as indicated Calculate the debt to assets ratio for 2026 and 2025 and the percentage change in the ratio over the two-year period. 2026 Debt to assets ratio 2025 Percentage change Interpret Brookwood Pines Hospital's debt-to-assets ratio. BPH's debt-to-assets ratio for 2026 indicates that about 32.6 cents of each dollar of is financed with A high ratio indicates of not being able to meet debt payments when due.