Listed below are the balance sheet and statement of operations for Wynn Memorial
ID: 2536945 • Letter: L
Question
Listed below are the balance sheet and statement of operations for Wynn Memorial Nursing Home for 2008 and 2009.
Total Liabilities and Assets 888 615
1. Compute Wynn Memorial Nursing Home’s current ratio.
2. Compute Wynn Memorial Nursing Home’s days in accounts receivable.
3. Compute Wynn Memorial Nursing Home’s long-term debt to net assets ratio.
4. Compute Wynn Memorial Nursing Home’s net assets to total assets ratio.
5. Compute Wynn Memorial Nursing Home’s total asset turnover ratio.
6. Compute Wynn Memorial Nursing Home’s fixed asset turnover ratio.
7. Compute Wynn Memorial Nursing Home’s return on total assets.
8. Compute Wynn Memorial Nursing Home’s operating margin.
Listed below are the industry standards of the above ratios for Wynn Memorial’s peer group. Use this information make comparisons.
Wynn Memorial Nursing Home Balance Sheet (in 000) For the Years Ending December 31, 2009 and 2008 2009 2008 Current Assets: Cash and Cash Equivalents $30 $50 Net Patient Receivables 295 235 Prepaid Expenses 80 80 Total Current Assets 405 365 Plant, Property, & Equipment Gross Plant, Property, & Equipment 350 300 (less Accumulated Depreciation) -70 -50 Net Plant, Property, & Equipment 280 250 Construction in Progress 203 0 Total Assets $888 $615 Current Liabilities: Accounts Payable $220 $190 Salaries Payable 75 50 Total Current Liabilities 295 240 Long-Term Liabilities: Bonds Payable 100 20 Total Long-Term Liabilities 100 20 Net Assets 493 355Explanation / Answer
Answer to Part 1.
Current Ratio = Current Assets / Current Liabilities
December 31, 2008:
Current Ratio = 365 / 240
Current Ratio = 1.52: 1
December 31, 2009:
Current Ratio = 405 / 295
Current Ratio = 1.37: 1
Answer to Part 2.
Days’ in Accounts Receivable = 365 * Average Accounts Receivable / Net Sales
December 31, 2009:
Average Accounts Receivable = (295 + 235) / 2
Average Accounts Receivable = $265
Days’ in Accounts Receivable = 365 * 265 / 1,400
Days’ in Accounts Receivable = 69.09 or 69 days
Answer to Part 3.
Long Term Debt to Net Assets Ratio = Long Term Debt / Net Assets
December 31, 2008:
Long Term Debt to Net Assets Ratio = 20 / 355
Long Term Debt to Net Assets Ratio = 0.06 times
December 31, 2009:
Long Term Debt to Net Assets Ratio = 100 / 493
Long Term Debt to Net Assets Ratio = 0.20 times
Answer to Part 4.
Net Assets to Total Assets Ratio = Net Assets / Total Assets
December 31, 2008:
Net Assets to Total Assets Ratio = 355/ 615
Net Assets to Total Assets Ratio = 0.58 times
December 31, 2009:
Net Assets to Total Assets Ratio = 493/ 888
Net Assets to Total Assets Ratio = 0.56 times
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