Financial Analysis Using the financial statements from the Major Medical Center
ID: 2773755 • Letter: F
Question
Financial Analysis Using the financial statements from the Major Medical Center Case Study at the end of chapter 15 (Financial Managment for Public Health and non-profit Managment 4th addition, Page #552), analyze the following: • Review the auditor’s opinion letter and analyze any concerns. • Review the financial statements. Analyze any unusual items and examine the balance sheet, operating statement, and cash flow statement. • Review the notes and analyze any causes for concern. • Calculate the following ratios using Excel: common size, current, quick, days of cash on hand, receivables turnover, average collection period, fixed asset turnover, total asset turnover, debt, debt to equity, times-interest-earned, operating margin, total margin, ROA, and RONA. • Evaluate Major Medical Center’s financial status.
Explanation / Answer
Ans) Review of opinion letter
Do to the reviewing of the letter we can know below.
It acts as moral check on the employees from committing defalcation or embezzlement.
Audited statements of account are helpful in settling liability for taxes, negotiating loans and for he determining the purchase consideration for business.
These are also useful for settling trade disputes for higher wages or bonus as well as claims in respect of damage suffered by property, by fire or some other calamity.
An audit can also help in detection of wastages and losses to show the different ways by which these might be checked, especially those that occur due to the absences or inadequacy of internal checks or internal control measures.
Audit ascertain whether the necessary books of accounts and allied records have been properly kept and helps the client in making good deficiencies or inadequacies in this respect.
Review the financial statement
By using the below ration we can analysis the financial statement.
Quick Ration: Quick Assets/Quick liability (It is giving the idea on the quick assets so that we can know the cash and other quick assets
Current Ration:- Current Assets/Current liability( It is the proportion of current assets available to cover current liability.
Cash Ration :- Cash + Cash equivalent +investment fund/current liability
Cash ration is an indicator of a company’s liquidity that further refines both the current ratio.
Like that we have so many ratio by using the that we can analysis the financial statement.
Analyze any unusual items and examine the balance sheet.
Unusual items are those which are not part of the regular operating activity like sale of assets and sale of investment (It is not of the regular activity.
For analyzing the balances sheet we have to analysis the below all.
Cash Account:- Amount of cash available for use then it is called cash account.
Current Assets, it include account receivable, bill receivable, inventory, cash and prepaid insurance usually there are having the current balances which are reported with current value.
Current liability :- It include account payable, bill payable, outstanding expense and wages payable.
Fixed Assets:- which give more than one year benefit like Plan and machinery and building.
Liability:- Loans taken from bank and other
Operating Statement
Operating Statement shows company revenue and expense enter period time give net income for the firm
At the time of preparation of the operating statement we have to consider the all expense and income
Cash flow Statement
Cash flow statement shows the company cash flows from operating activity flow, investment activity and financial activity cash flow like that.
Operating Cash flow :- It shows that net cash flow from the operating activity.
Investment activity:-It shows that net cash flow from the investment activity.
Financial activity :- It shows that net cash flow from the financial activity.
Notes:- which gives additional information about financial statement.
Current Ratio
=
Current Assets
Current Liability
Quick Ratio
=
Quick Assets
Quick liability
Cash on hand
=
Cash + Cash equivalent +Invested Funds
Current Liability
Receivable turnover
=
Account Receivble
Sales
Average accounts collection
=
Average Account receivable
Annual Sales/365 days
fixed Asset turnover
=
Fixed Assets
Sales
Total Assets turnover
=
Total Assets
Sales
debt ration
=
Total Liabilities
Total Assets
debt to equity ratio
=
Total Liability
Shareholder Equity
time interest earning
=
Earning before interest and tax (EBIT)
Interest Expense
Operating Profit
Operating Margin
=
Sales
Total Margin
=
Net Profit
Sales
ROA
=
Net income
Total Assets
RONA
=
Net income
Fixed Assets + Net working capital
Current Ratio
=
Current Assets
Current Liability
Quick Ratio
=
Quick Assets
Quick liability
Cash on hand
=
Cash + Cash equivalent +Invested Funds
Current Liability
Receivable turnover
=
Account Receivble
Sales
Average accounts collection
=
Average Account receivable
Annual Sales/365 days
fixed Asset turnover
=
Fixed Assets
Sales
Total Assets turnover
=
Total Assets
Sales
debt ration
=
Total Liabilities
Total Assets
debt to equity ratio
=
Total Liability
Shareholder Equity
time interest earning
=
Earning before interest and tax (EBIT)
Interest Expense
Operating Profit
Operating Margin
=
Sales
Total Margin
=
Net Profit
Sales
ROA
=
Net income
Total Assets
RONA
=
Net income
Fixed Assets + Net working capital
Related Questions
drjack9650@gmail.com
Navigate
Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.