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) | |||
| 2019 | |||
| 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) | ||
| Revenues: | ||
| 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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