Using the Financial Statements found on Page 543 and 544, assume that the Statements are for a full year rather than 90 days and then calculate the following four ratios: Days Cash on Hand, Days Receivable, Debt Service Coverage Ratio, and Operating Margin. Please note that the Maximum Annual Debt Service for the practice is $22,200. Please use the formulas found on page 128, you may also want to review Figures 12-1 and 12-2 on pages 131 and 133 Please assume that the Percent of Credit Revenues equals 100%
as an attachment and formatted as a Word document Chapter 11 543 Doctors Smith and Brown: Statement of Net Income for the Three Months Ended March 31, 2 Revenue Net patient service revenue 180,000 -0- Other revenue Total Operating Revenue 180,000 Expenses Nursing/PA salaries Clerical salaries Payroll taxes/employee benefits Medical supplies and drugs Professional fees 16,650 10,150 4,800 15,000 3,000 Dues and publications Janitorial service Office supplies Repairs and maintenance Utilities and telephone Depreciation Interest 2,400 1,200 1,500 1,200 6,000 30,000 3,100 5,000 Other 100,000 Total Expenses 80,000 Income from Operations Nonoperating Gains (Losses) Interest Income -0- -0- Nonoperating Gains, Net 80,000 Net Income EXAMPLES AND EXERCISES, SUPPLEMENTAL MATERIALS, AND SOLUTIONS 544 Doctors Smith and Brown Balance Sheet March 31, 2 Assets 25,000 40,000 5,000 Current Assets Cash and cash equivalents Patient accounts receivable Inventories-supplies and drugs 70,000 Total Current Assets Property, Plant, and Equipment Buildings and Improvements Equipment Total Less Accumulated Depreciation Net Depreciable Assets Land 500,000 800,000 1,300,000 (480,000) 820,000 100,000 920,000 Property, Plant, and Equipment, Net 10,000 Other Assets 1,000,000 Total Assets Liabilities and Capital Current Liabilities 10,000 Current maturities of long-term debt 20,000 Accounts payable and accrued expenses Total Current Liabilities 30,000 Long-Term Debt Less Current Portion of Long-Term Debt 180,000 (10,000) Net Long-Term Debt 170,000 Total Liabilities 200,000 Capital Total Liabilities and Capital 800,000 1,000,000 Doctors Smith and Brown Statement of Changes in Capital for the Three Months Ended March 31,2 Beginning Balance Net Income Ending Balance $720,000 80,000 $800,000 128 CHAPTER 12 Financial and Operating Ratios as Performance Measores Exhibit 12-1 Eight Basic Ratios Used in Health Care Liquidity Ratios 1. Current Ratio LIQU Current Assets Liquid ratios r Current Liabilities nizatio 2. Quick Ratio to cash Cash and Cash Equivalents + Net Receivables Curre Current Liabilities 3. Days Cash on Hand (DCOH) The C Unrestricted Cash and Cash Equivalents exam Cash Operation Expenses + No. of Days in Period (365) 4. Days Receivables Net Receivables Net Credit Revenues + No. of Days in Period (365) be C Con Solvency Ratios 5. Debt Service Coverage Ratio (DSCR) Qu Change in Unrestricted Net Assets (net income) Th liall +Interest, Depreciation, Amortization Maximum Annual Debt Service 6. Liabilities to Fund Balance Total Liabilities Unrestricted Fund Balances Profitability Ratios 7. Operating Margin (%) T Operating Income (Loss) Total Operating Revenues 8. Return on Total Assets (%) EBIT (Earnings Before Interest and Taxes) Total Assets Courtesy of Resource Group, Ltd., Dallas, Texas. Solvency Ratios 131 pan Sheet December 3, 202 oret Asurs at and apents cvble ventiries Pepad insurance 1.Ourvet ati oale 250000 000 Curnt Ats 25.000 5.000 -13028 ser Carent Assets rtPlant and Equipment unt Adngs amet inet) shaperty Plant, and Equipment $100 000 2 Quik Rat 260000 Cah and Ch fae Nit0000+20 0 360 000 1275 ane As nastments $133.000 133.000 alther Assets 1eAsets S043.000 Sen 1 luabt and Fund Balance aent Liabilte Dret maturites of long-term debr Acurts payable and accrued expenses 23000 tel Cuent Liabities 5 000 (40,000 M4T00 S52,000 3 Days Cash on Hand 0COH 345 Step 2 Unrestricted Cash and Cash Eivaents Cash Operate daynn perod (35) 1,845.000 aem Debt Curnent Matarities of Long-Tem Debt (52 000% $252.000 ded by rLong-Tem Debr Totl Liablites 505 200,000 $545.000 ep 3 nd Balances Utricted fund balance stricted fund balance Tatal Fand Balances Labtes and Fund Balance 190.000 $418.000 375 days 418,000 $363.000 Suement of Revenue and Expenses Sep 1 Percent of Credit Revenues intormation obtained elsevhete For the Year Ending December 31 20 Revenue et srient service revenue 2.000000 foal sperating revenue r2.000,000 x90% 1,800.000 ,Davs Receivables Step 2 Net Receivables Net Credit Rvene dided bydaysin period (6 ering Expenses Mecicalsurgical services Theipy services Oter protessional services Sapport services Geal envices Dpeciation 1800000 s800,000 860,000 80,000 4901 220,000 65000 40000 20000 $1M5.00) Sep 3 1 250.000 4.931 50.7 days Tal operating egenses ane from Opertions $115.000 N ting Gans (osses inconver $5.000 e sanupering gains 5.000 ee and Guim in Excess of bos and Losses $120.000 inneidd Fund Balance $120,000 Figure 12-1 Examples of Liquidity Ratio Calculations. Counesy of Resource Group, Ltd, Dallas, Texas. Profitability Ratios 133 ivided etworh pane Set December 31, 20 orent Aste Agunts recevable (net) meries Pepaid Inurance tlCurent Assets ep 1 $190000 250 000 25000 5.000 $479.000 S Rum on Tetal Assets (%) 12000 20 00 1T damings Beore ierest and Ta) petPlant and Eouipment Lant digs (et) fapnent net aPhoperts Plant and Equipment $100 000 20000 which is 140 000 360.000 ivalem 1454% me Aus ments $133.000 133000 is com he ther Asset sel Asets 6.Operating Margie 115,000 s063 000 Operating Income s To Coing e bitn and Fund Balance Carnt Liabilities Caent maturties of long-term debe Aounts payable and accrued expenses of each 575% $52.000 293,000 tement 7 Labes to Fund Blance source 545,000 4000 e1304 $345.000 t Current Liabilites Total Liabilites Unestricted Fand 1aance profit Eurther ap Debr Iet orent matunities of long-term debt $252.000 -52.000 200000 $545.00 Long-ter Debt Tal Lbites Aed Bances Uestricted fund balance Resticted fund balance Total Fand Balances Tst Labilites and Fund Balance 5418.000 418,000 $963.000 rating it, but ied to Stement of Revenue and Expenses Deer Service Coverage Rato (0SCR Step For the Year Ending December 31, 20×2 $2.000.000 Change i Uestricted Net Asss t income plas DepreciationAmortiotons pls Interest 120,000 20000 lenue et patient service revenue 40000 2,000,000 Mainum Amu Debt Service Total operating revenue ating Opeating Expenses Medicalsurgical services Theapy services Other professional services Support services Gmeral services Deciation $600,000 860.000 80.000 220.000 65.000 41000 20.000 Stro 2 180 000 2 D0Tintomation deived etseutere Maxinum Annsal Debt Services -25 st redit 1885.000 atal operating epenses are $115.000 ne from Openations nsid- fperating Gains Losses) d ncome eting gains $5,000 5,000 Ane and ains in Excess of fos and Losses $120000 $120.000 ded se in nretcted Fund Balance Figure 12-2 Examples of Solvency and Profitability Ratio Calculations Gourten of Resource Group, Ltd, Dallas, Texas.