Instructions

This week's assignment focuses on the application and interpretation of key financial ratios.

Please refer to the balance sheets and income statements on pages 533-534 (Drs. Smith and Brown) and Chapter 33 (Metropolis Health System) to obtain the necessary financial information to tabulate Liquidity, Solvency, and Profitability ratios. For both organizations tabulate the following ratios:

• Liquidity:Current ratio and quick ratio
• Solvency:Debt service coverage and liabilities to fund balance
• Assume Drs. Smith and Brown's maximum annual debt service is $22,200 to complete these ratios.
• Profitability:Operating margin and return on total assets

Reference the real-world financial statements that you utilized in prior assignments this semester. Identify the necessary information and tabulate the following for your company:

• Current Ratio
• Liabilities to Fund Balance Ratio
• Operating Margin Ratio

What conclusion do you draw (or what additional questions would you ask the company) as you review the ratios? If you are unable to tabulate any of these ratios, what financial values are missing from published financial statement that are needed to complete the tabulation?

Use the handout to record your answers.

HI 2230_MOD3_Financial Ratios.docx