Question: Referring Exhibit 11-1 listed below; Explain the Eight Basic Ratios Used in Health Care, why they are important, and how they are used. Eights basic

Referring Exhibit 11-1 listed below; Explain the "Eight Basic Ratios Used in Health Care", why they are important, and how they are used.

Eights basic ratios used in healthcare:

Liquidity Ratios

1. Current ratio

Current assests/ Current liabilites

2. Quick ratio

Cas and cash equivalents + Net recievables/ Current Liabilities

3. Days cash on hand (DCOH)

Unrestricted cash and cash equivalents/ cash operation expenses divided # of days in period (365)

4. Days receivable

Net recievables/ Net credit revenues divided by # of days in period (365)

Solvency Ratios

5. Debt service coverage Ratio (DSCR)

Change in urestricted net assets (net income)+ Interest, Depreciation, Amortization/ Maximum Annual Debt Service

6. Liabilities to fund balance

Total liabilites/ Unrestricted funds balance

Profitability Ratios

7. Operating margin (%)

Operating income (Loss)/ total operating revenues

8. Return on Total assest (%)

EBIT (earnings before interestand Taxes)/ Total assets

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