Recent financial statements fo

Chapter 17 Problem

17.7 Recent financial statements for the Heart Hospital are provided in spreadsheet “Heart Hospital”

Calculate and interpret the following ratios for the Heart Hospital (hint: in your interpretation consider benchmarking to industry average)


Industry Average

           Return of assets                     22.5%

           Current ratio                           2.0      

           Days of cash on hand             85 days

           Average collection period       20 days           

           Debt ratio                                40%

           Debt-to-equity ratio                 0.67

           Times interest earned             5.0

           Fixed asset turnover ratio       1.4


  The Heart Hospital 
  As of September 30, 2019 (in thousands)
Current Assets    
  Cash  $   14,500  
  Accounts Receivable, Net  $     5,918  
  Medical Supplies Inventory  $     1,211  
  Prepaid Expense and Other Current Assets  $     1,429  
Total Current Assets  $   23,058  
  Property, Plant and Equipment, Net  $   34,200  
  Other Assets  $        901  
Total Assets  $   58,159  
Current Liabilities    
  Accounts Payable  $     2,208  
  Accrued Compensation and Benefits  $     2,543  
  Other Accrued Liabilities  $     1,843  
  Current Portion of Long-Term Debt  $     2,064  
Total Current Liabilities  $     8,658  
  Long-Term Debt  $   22,071  
Total Liabilities  $   30,729  
  Owners’ Equity  $   27,430  
Total Liabilities and Owners’ Equity  $   58,159  
The Heart Hospital
Statement of Operations
Year Ended September, 30, 2019 (in thousands)
  Patient Service Revenue net of Discounts and Allowances  $   70,550
  Provision for Bad Debt  $   (2,300)
  Net Patient Service Revenue  $   68,250
Operating Expenses:  
  Personnel Expense  $   21,707
  Medical Supplies Expense  $   15,047
  Other Operating Expense  $     9,721
  Depreciation Expense  $     2,625
  Interest Expense  $     1,322
  Total Operating Expense  $   50,422
Income from Operations  $   17,828
Non-Operating Income  $        650
Net Income  $   18,478
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