Chapter 13 -- Financial Condition Analysis

PROBLEM 3

Bayside Memorial Hospital's financial statements are presented in Exhibits 13.1, 13.2, and 13.3.

a. Calculate Bayside's financial ratios for 2009. Assume that Bayside had $1 million in lease

payments and $1.4 million in debt principal repayments in 2009. (Hint: Use the book discussion to

identify the applicable ratios.)

b. Interpret the ratios. Use both trend and comparative analysis. For the comparative analysis, assume

that the industry average data presented in the book is valid for both 2009 and 2010.

ANSWER

UNDERSTANDING HEALTHCARE FINANCIAL MANAGEMENT Chapter 13 -- Financial Condition Analysis PROBLEM 3 Bayside Memorial Hospital's financial statements are presented in Exhibits 13.1, 13.2, and 13.3. a. Calculate Bayside's financial ratios for 2009. Assume that Bayside had $1 million in lease payments and $1.4 million in debt principal repayments in 2009. (Hint: Use the book discussion to identify the applicable ratios.) b. Interpret the ratios. Use both trend and comparative analysis. For the comparative analysis, assume that the industry average data presented in the book is valid for both 2009 and 2010. ANSWER UNDERSTANDING HEALTHCARE FINANCIAL MANAGEMENT Chapter 13 -- Financial Condition Analysis PROBLEM 7 Kansas Orthotics had $24,000,000 in sales last year. The company's net income was $400,000. Its total assets turnover was 6.0. The company's ROE was 15 percent. The company is financed entirely with debt and common equity. What is the company's debt ratio? ANSWER UNDERSTANDING HEALTHCARE FINANCIAL MANAGEMENT Chapter 13 -- Financial Condition Analysis PROBLEM 9 Ruth Home Health currently has $1,000,000 in accounts receivable. Its days in patient accounts receivable (DPAR) is 50 days (based on a 365-day year). The agency wants to reduce its DPAR to the industry average of 32 days by pressuring more of its customers to pay their bills on time. The CFO estimates that, if this policy is adopted, the agency's net patient service revenue will fall by 10 percent. Assuming that the agency adopts this change and succeeds in reducing its DPAR to 32 days and loses 10 percent of its net patient service revenue, what will be the level of accounts receivable following the change? ANSWER Level of account recievable = 1,000,000 -0.1*1,000,000 =$900000