Answer

Solved by AI

To compute the liquidity ratios for the Metropolis Health System (MHS) case study, you'll need to refer to the financial statements provided in Chapter 28 of your HE420 Healthcare Finance Accounting textbook. Here's a general step-by-step approach on how to calculate four common liquidity ratios:

Current Ratio:

• Formula: Current Ratio = Current Assets / Current Liabilities
• Explanation: This ratio measures the ability of MHS to cover its short-term liabilities with its short-term assets. A higher ratio indicates better liquidity.

Quick Ratio (Acid-Test Ratio):

• Formula: Quick Ratio = (Current Assets - Inventories) / Current Liabilities
• Explanation: This ratio provides a more stringent test of liquidity by excluding inventory, as inventory might not be as easily converted to cash.

Days Cash on Hand:

• Formula: Days Cash on Hand = (Cash and Cash Equivalents + Short-Term Investments) / (Operating Expenses / 365)
• Explanation: This ratio shows how many days the MHS can continue operations using its current cash and cash equivalents without needing additional revenue.

Operating Cash Flow Ratio:

• Formula: Operating Cash Flow Ratio = Cash Flow from Operations / Current Liabilities
• Explanation: This ratio examines whether the cash generated from operations is enough to cover the current liabilities.

For accurate calculations, you'll need the specific figures for current assets, current liabilities, inventories, cash and cash equivalents, short-term investments, operating expenses, and cash flow from operations from the MHS financial statements. If you provide these numbers, I can assist with the actual calculations. Remember, the aim is to evaluate the short-term financial health and liquidity of the Metropolis Health System.