D. Identify the information needed for decision-making based on the HCHC financial statements by doing the following:

1. Calculatethreeof the following financial ratios for the organization:

Cost-to-Charge Ratio: This ratio indicates that 78.5% of revenue is spent on expenses, leaving a 21.5% margin.

• Formula: Total Expenses / Total Revenue
• Calculation: $5,215,000 / $6,640,000
• Result: 78.5% (value)

Return on Assets (ROA):Shows that for every $1 in assets, HCHC generates $0.34 in net income.

• Formula: Net Income / Total Assets
• Calculation: $1,280,000 / $3,770,000
• Result: 33.95% (value)

Return on Equity (ROE):Demonstrates a strong return on equity investment.

• Formula: Net Income / Total Equity
• Calculation: $1,280,000 / $2,345,000
• Result: 54.58% (value)

D2. Specifytworealistic current or future influences that would guide decision-making and explain their importance in improving financial health for HCHC based on your strategy proposed in part C2.

1. Enhanced efficiency in overhead allocation: According to my research, HCHC can implement an activity-based costing (ABC) system to cut unnecessary administrative expenses and enhance funding for direct patient care,

this will also lead to higher operational efficiency and better resource utilization.

1. Revenue diversification strategy: Private donations account for 72% of total revenue, posing a financial risk if donor support declines. HCHC should develop patient services and telehealth platforms to enhance Medicare/Medicaid profits and reduce reliance on donations, theoretically resulting in a 5-10% annual revenue improvement.

By implementing a revised cost allocation strategy and focusing on efficiency, HCHC canreduce unnecessary overhead, improve financial health, and diversify revenue streams.These steps willenhance sustainability and long-term profitability.

justify two recommendations to optimize the financial performance of HCHC.