Question

Evaluate the financial stability of Webster Health Systems and Midcare

Does both hospital appear to be financially stable? Webster Health Systems Current Ratio is 2.11. Days Cash on Hand is 10.45. Days in AR is 56.11, ROA is 5.94%, and Debt Ratio is 52.86%. Midcare's Current Ratio is 2.05. Midcare's Days Cash on Hand is 20.35. Its AR is 64.25. The ROA is 3.50. Midcare's Debt Ratio is 42%.

Answer 1

Both appear to be financially stable. The current ratio of both companies shows good liquidity since the current assets are more than sufficient to cover the current liabilities. Days cash on hand is sufficiently good agains showing fine liquidity. This is lesser in case of Webster which shows that it may face cash crunch at certain times. Days in AR is high which shows that the hospitals are taking a long time to collect their dues. This problem is more sever in case of Midcare.

ROA is better for Webster, though it is still a low figure. However the industry average is to be seen in order to truly comment upon the ROA values. Finally both hospitals are using a lot of debt which represents high risk to the businesses. The reliance on debt is greater in case of Webster showing that it carries higher risk.