Question

Determine the below ratios for 2011 and 2012 and compare the Hospitals financial performance year to...

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  


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Homework Answers

Answer #1

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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