Determine the below ratios for 2011 and 2012 and compare the Hospitals financial
ID: 2826247 • Letter: D
Question
Determine the below ratios for 2011 and 2012 and compare the Hospitals financial performance year to year based on those ratios. Make sure you explain what each ratio measures
Return on Net Assets
Cash Flow to Debt
FINANCIAL STATEMENTS:
Cash Flows from Operating Activities: 2012 2011
Cash received from patient services $3783 $2590
Cash paid to employees and suppliers (3684) (2541)
Interest paid (16) (14)
Interest earned 13 6
Net Cash from Operations $96 $41
Cash Flows from Investing Activities:
Purchase of Property and Equipment ($25) ($19)
Securities Purchase ($35) ($15)
Net Cash from Investing Activities ($60) ($34)
Cash Flows from Financing Activities:
Contributions 10 6
Repayment of long-term debt (13) (0)
Net cash from financing activities ($3) ($6)
Net increase (decrease) in cash and equivalents ($33) ($13)
Cash and equivalents, beginning of year $41 $28
Cash and equivalents, end of year $74 $41
Revenues 2012 2011
Patient Service Revenue $4042 $2687
Provision for bad debts $46 $21
Net Patient Service Revenue $3996 $2666
Other operating revenue $27 $32
Total Revenues $4023 $2698
Expenses:
Salaries and benefits $2714 $1835
Supplies and drugs 1042 675
Insurance 90 83
Depreciation 21 15
Interest 16 19
Total expenses $3883 $2627
Operating Income $140 $71
Non-operating Income:
Contributions $10 $22
Investment income 13 6
Total Non-operating income $23___ 28____
Net income (excess of revenues
over expenses) $163 $99
ASSETS 2012 2011
Current Assets:
Cash and cash equivalents $74 $41
Shor-term investments $147 $137
Accounts receivable, net 727 476
Inventories 27__ 22___
Total Current Assets $975__ $676__
Investments 125___ $100____
Property and Equipment:
Medical and office equipment $56 $54
Vehicles 70__ 47___
Total $126 $101
Less: Accumulated Depreciation (45) (24)
Net Property Equipment $81 $77
Total Assets $1181 $853
LIABILITIES AND EQUITY
Current Liabilities:
Notes payable $13 $13
Accounts Payable 40 21
Accrued expenses 496 337
Total Current Liabilities $541 $371
Long term debt $154__ $167_
Total Liabilities $703 $538
Equity (Net Assets) $478 $315
Total Liabilities and equity $1181 $853
Explanation / Answer
Return on net assets 2012 = Net Income/(Fixed assets + NWC)
= 163/(81+975-541) = 31.65%
2011 =99/(77+676-371) = 25.92%
The RONA ratio explains the efficiency of the company with regard to net assets in use. Since this ratio has increased, it implies that the firm has put its net assets to better use to earn profits.
Cash flow to debt 2012 = Cash flow from operations/Total debt
= 96/ 703= 13.66
2011= 41/538 = 7.62
This ratio represents the ability of the firm to repay all its debt from cash from operations. A higher ratio indicates that the firm is in a better position to support its debt. Since this ratio has improved, the debt bearing capacity of the firm has also increased.
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