Ratio Optum & CMS Median Ratio Hospital Industry 1-99 beds 100-199 beds 200-299
ID: 2779149 • Letter: R
Question
Ratio
Optum & CMS Median Ratio Hospital Industry
1-99 beds
100-199 beds
200-299 beds
300-399 beds
400+ beds
Desired position
Liquidity Ratios
Current ratio
2.11
2.18
2.04
1.88
1.71
1.84
Above
Quick ratio
1.52
1.65
1.39
1.27
1.42
1.50
Above
Acid test ratio
0.30
0.35
0.18
0.20
0.20
0.38
Above
Days in account rec.
49
47
45
44
48
44
Below
Days cash on hand
86
85
81
102
76
119
Above
Average pmt period, days
50
45
51
56
53
52
Below
Revenue, expense, and profitability ratios
Operating revenue per adjusted
$7,448
$7,086
$6,407
$6,766
$7,121
$7,517
Above
Operating expense per adjusted
$7,197
$6,494
$6,112
$6,260
$6,819
$7,399
Below
Salary and benefit expense as a percentage of operating expense
40%
40%
38%
38%
38%
38%
Below
Operating Margin
0.03
0.02
0.03
0.04
0.04
0.04
Above
Nonoperating revenue
0.04
0.05
0.03
0.05
0.07
0.17
Varies
Return on total assets
0.04
0.04
0.04
0.04
0.05
0.05
Above
Return on nets assets
0.08
0.08
0.08
0.09
0.10
0.09
Above
Activity ratios
Total asset turnover ratio
1.07
1.19
1.03
0.99
1.03
1.06
Above
Net assets turnover ratio
2.12
2.17
2.03
2.11
2.04
2.21
Above
Age of plant ratio
10.31
10.41
10.12
11.97
10.93
11.19
Below
Capital structure ratios
Long-term debt to net assets ratio
0.21
0.18
0.31
0.42
0.38
0.59
Below
Net assets to total assets ratio
0.54
0.58
0.51
0.47
0.52
0.48
Above
Times interest earned ratio
3.78
3.47
3.43
3.64
4.43
5.13
Above
Debt service coverage ratio
3.18
3.51
3.63
3.50
6.36
4.24
Above
15. Exhibit 4.21 lists the financial ratios for 189-bed Collingswood Community Hospital. Assess the revenue, expenses, and profitability, liquidity, activity and capital structure of Collingwood for 20x1. Explain why these financial measures changed between 20x0 and 20x1, and compare them to national industry benchmarks for Collingwood’s bed size, using data from Exhibit 4.16a.
Ratio
20X1
20X0
Liquidity ratios
Current ratio
3.05
2.01
Acid test ratio
0.65
0.35
Days in accounts receivable
48
60
Days cash on hand
215
120
Average payment period, days
62
48
Revenues, Expense, & Profitability ratios
Operating revenue per adjusted
0.02
0.01
Operating expense per adjusted
0.35
0.05
Salaries and benefit expense as a percentage of total operating expense
0.15
0.04
Operating margin
0.04
0.08
Nonoperating revenue
0.15
0.04
Return on net assets
0.13
0.04
Activity ratios
Total asset turnover ratio
0.90
1.20
Fixed asset turnover ratio
2.20
2.75
Age of plant
8.45
11.15
Capital structure ratios
Debt service coverage ratio Long-term debt to net assets
2.75
4.00
Long-term debt to net assets
1.40
0.55
Net assets to total assets
0.42
0.65
Ratio
Optum & CMS Median Ratio Hospital Industry
1-99 beds
100-199 beds
200-299 beds
300-399 beds
400+ beds
Desired position
Liquidity Ratios
Current ratio
2.11
2.18
2.04
1.88
1.71
1.84
Above
Quick ratio
1.52
1.65
1.39
1.27
1.42
1.50
Above
Acid test ratio
0.30
0.35
0.18
0.20
0.20
0.38
Above
Days in account rec.
49
47
45
44
48
44
Below
Days cash on hand
86
85
81
102
76
119
Above
Average pmt period, days
50
45
51
56
53
52
Below
Revenue, expense, and profitability ratios
Operating revenue per adjusted
$7,448
$7,086
$6,407
$6,766
$7,121
$7,517
Above
Operating expense per adjusted
$7,197
$6,494
$6,112
$6,260
$6,819
$7,399
Below
Salary and benefit expense as a percentage of operating expense
40%
40%
38%
38%
38%
38%
Below
Operating Margin
0.03
0.02
0.03
0.04
0.04
0.04
Above
Nonoperating revenue
0.04
0.05
0.03
0.05
0.07
0.17
Varies
Return on total assets
0.04
0.04
0.04
0.04
0.05
0.05
Above
Return on nets assets
0.08
0.08
0.08
0.09
0.10
0.09
Above
Activity ratios
Total asset turnover ratio
1.07
1.19
1.03
0.99
1.03
1.06
Above
Net assets turnover ratio
2.12
2.17
2.03
2.11
2.04
2.21
Above
Age of plant ratio
10.31
10.41
10.12
11.97
10.93
11.19
Below
Capital structure ratios
Long-term debt to net assets ratio
0.21
0.18
0.31
0.42
0.38
0.59
Below
Net assets to total assets ratio
0.54
0.58
0.51
0.47
0.52
0.48
Above
Times interest earned ratio
3.78
3.47
3.43
3.64
4.43
5.13
Above
Debt service coverage ratio
3.18
3.51
3.63
3.50
6.36
4.24
Above
Explanation / Answer
Ratio 20X1 20X0 Industry Benchmarks Reasons for change Liquidity ratios Current ratio 3.05 2.01 2.04 Increased on account of higher inventory levels Acid test ratio 0.65 0.35 0.18 Increased on account of lower payables Days in accounts receivable 48 60 45 Reduction owing to more efficient control on receivable Days cash on hand 215 120 81 Increase owing to receivables being paid on time, payables held for a longer time frame Average payment period, days 62 48 51 Increase owing to hold over payables for around 2 months average Revenues, Expense, & Profitability ratios Operating revenue per adjusted 0.02 0.01 Not comparable; info not provided Increase in turnover Operating expense per adjusted 0.35 0.05 Not comparable; info not provided Corresponding to the turnover increase Salaries and benefit expense as a percentage of total operating expense 0.15 0.04 Not comparable; info not provided Corresponding to the turnover increase Operating margin 0.04 0.08 0.03 Marginal increase in turnover, higher increase in costs Nonoperating revenue 0.15 0.04 0.03 Higher misc. income during the year Return on net assets 0.13 0.04 0.08 Higher return owing to misc. income % change Activity ratios Total asset turnover ratio 0.9 1.2 1.03 Lower owing to better utilisation of assets Fixed asset turnover ratio 2.2 2.75 2.03 Better utilisation of fixed assets Age of plant 8.45 11.15 10.12 Reduction owing to wear and tear Capital structure ratios Debt service coverage ratio Long-term debt to net assets 2.75 4 3.63 Better servicing of long term debts Long-term debt to net assets 1.4 0.55 0.31 Higher owing to increased inventory levels Net assets to total assets 0.42 0.65 0.51 Reduced on account of higher inventory levels
Related Questions
Navigate
Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.