Problem #3 You are examining Salem Inc. which is a Healthcare Organization. You
ID: 346702 • Letter: P
Question
Problem #3
You are examining Salem Inc. which is a Healthcare Organization. You have examined the 2017 annual report of the organization. Here is the following financial information you have in front of you.
Patient Revenue $10,000,000
Interest Expense $5,000
Net Fixed Assets $5,000,000
Current Assets $800,000
Current Liabilities $300,000
Net Accounts Receivable $100,000
Accumulated Depreciation $90,000
EBIT $25,000
Total Debt $2,000,000
Net Income (revenues-expenses) $200,000
Total Equity $3,000,000
Depreciation Expense $20,000
Based upon this information calculate:
Current Ratio
Times Interest Earned Ratio
Fixed Asset Turnover
Debt to Equity Ratio
Total Margin Ratio
Return on Net Assets Ratio
G) Average Age of Plant
Explanation / Answer
The formulae along with the calculations are below:
Note: The values are in $
A) Current Ratio= Current Assets/ Current Liabilities
=800000/300000= 2.67
B) Times Interest Earned Ratio= EBIT/ Interest Expense
= 25000/5000= 5
C) Fixed Asset Turnover= Patient Revenue/ Net Fixed Assets
= 10,000,000/ 5,000,000= 2
D) Debt To Equity Ratio= Total Debt/ Total Equity
= 2,000,000/3,000,000= 0.67
E) Total Margin ratio= Net Income/ Patient Revenue
= 2,00,000/10,000,000= 0.02
F)Return on Net Assets Ratio= Net Income/ Net Fixed Assets
= 2,00,000/ 5,000,000= 0.04
G) Average Age of Plant= Accumulated Depriciation/ Depriciated Expense
= 90,000/ 20,000= 4.5 Years
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