Reference no: EM131704593
Introduction
Heretofore, you've adopted a single acute care hospital and provided a review of its organizational posture and its footprint within its primary and secondary markets. At this point in your adoption, the remaining concern is the overall fiscal status of your organization, i.e., "What is the fiscal shape of your facility?" The working challenge now is to determine how you will make conclusions about the fiscal status of your hospital. The template below is to be used to calculate a set of generally accepted ratios. In turn, these results will enable you to develop an argument about the fiscal strength of your adopted hospital. Note also that I've provided examples of how to complete this template.
Ratio Analysis. To this point, information conveyed by the financial statements has been used to develop a picture of the organizations fiscal status and financial operating results. As a next analytical step, generally accepted financial ratios will be calculated for the purpose of going beyond detail contained in the facility's audited financial statements. The intent of this analysis is to gain additional detail about the fiscal status of the organization. To this end, the following ratios have been determined as well as their respective benchmarks:
Assignment: Asset Management
This total Adopt-A-Hospital project consists of a number of assignments. Four (4) assignments address the primary financial analysis elements.
First, provide a definition of each key aspect of organizational fiscal status, e.g.,
1) Profitability,
2) Liquidity,
3) Asset Management, and
4) Debt Management.
Second, calculate the specific ratios using financial statement results from your Adopted Hospital's audit report. It will be necessary to interpret the outcome for each ratio as well in this template.
Third, using this calculated and interpreted information, prepare a summary review of your hospital's fiscal status according to the four (4) attributes of
1) Profitability,
2) Liquidity,
3) Asset Management, and
4) Debt Management.
For this Assignment_7your focus is on Asset Managementthe specific ratios, their individual interpretation, and a summary of your facility's asset managementstatus.
Ratio Analysis - Asset Management
I. Asset Management Defined[In this space, provide a solid, comprehensive definition of asset management, including what asset managementtells you about an organization.] (10) points) [Points will be subtracted for 1) one-sentence definitions and/or 2) limited vague, unclear definitions.]
Asset management means show how efficiently the company is using its assets to generate sales/revenues or how much cash is being tired up in other assets such as receivables and inventory. Also, Which means indicate how much a firm has invested in a particular type of asset relative to the revenue the asset is producing. A set of ratios that measure how effectively a firm is managing its assets. Measures how effectively the firm uses its plant and equipment. An older firm will have a higher fixed asset turnover ratio.
a. The asset management ratio ¬-Fixed Asset Turnover Ratio = (10 points)
Total revenues/Net fixed assets
Total operating revenue =397,253,279
Total non-operating revenue ==8,599,826
Total revenues ==8,599,826+ 397,253,279= 397,261,879
Net fixed assets =140,625,863
Fixed Asset Turnover Ratio =397,261,879/140,625,863= 2,82 times
Industry Average = 2.2
Interpretation. [After each ratio, provide a definition of what the calculated ratio tells you about the facility's performance as well as an interpretation of the actual calculated results.](10 points)[Points will be subtracted for interpretations that do not provide information about 1) the internal meaning of the ratio and/or 2) benchmarking information about your hospital.]
Fixed asset turnover ratio showed how well the association is consuming its fixed assets to generate revenues. In the case of Columbus regional Hospital.there were about $2,82 in total revenues for every dollar spent in fixed assets. This shows that Columbus regional hospital management was relatively more effective than its industry. Moreover, it could be said that Columbus regional hospital management effectively used available fixed assets to generate revenues.
b. The asset management ratio - Days in patient accounts receivable.
DPAR = Net patient accounts receivable/
(Net patient service revenue/365)
Net patient accounts receivable = 46,321,679
Net patient service revenue = 391,123,301
Net patient service revenue/365 = 391,123,301/365= 1,071.57069.
DPAR =107.187126/46,321,679= 0,02
DPAR = 0,02 days
Industry average = 64.0 days
Interpretation. [After each ratio, provide a definition of what the calculated ratio tells you about the facility's performance as well as an interpretation of the actual calculated results.] (10 points)[Points will be subtracted for interpretations that do not provide information about 1) the internal meaning of the ratio and/or 2) benchmarking information about your hospital.]
Days in patient accounts receivable measures the amount of time between the rendering of services by healthcare provider and when payment is made.
Moreover, it could be said that it takes Columbus reigional Hospital about 0,02 days from the time that a service is provided to receive payment for that service. This hospitalseems to be much more effective in collecting its receivables than its industry peers as indicated by much lower DPAR.However, this could be the result of very inflexiblecredit policy and hence could affect Net patient service revenue in the future as third party payer (Insurer) go to deal with other healthcare service providers.
c. The asset management ratio - Total Assets Turnover = (10 points)
Total revenues/total assets
Total operating revenue =397,253,279
Total non-operating revenue ==8,599,826
Total revenues ==8,599,826+ 397,253,279= 397,261,879
Total assets =443,456,121
Total assets turnover ratio =397,261,879
/443,456,121= 895.831313
Industry Average = 0.97
Interpretation. [After each ratio, provide a definition of what the calculated ratio tells you about the facility's performance as well as an interpretation of the actual calculated results.] (10 points)[Points will be subtracted for interpretations that do not provide information about 1) the internal meaning of the ratio and/or 2) benchmarking information about your hospital.]
Total assets turnover hhowed how effectively an organization management is consuming its total assets (current and long term assets) to generate revenues. In the case of Columbus regional there were about = 895.831313in total revenues for every dollar invested in total assets. This showed that Columbus regional management was relatively more effective than its industry peers. Moreover, it could be said that this hospital management effectively used available assets to generate revenues.
d. The asset management ratio - Average Age of Plant = (10 points)
Accumulated depreciation/Depreciation expense
Accumulated depreciation =
Depreciation expense =
Average age of plant =
Industry Average = 9.1 years
Interpretation [After each ratio, provide a definition of what the calculated ratio tells you about the facility's performance as well as an interpretation of the actual calculated results.] (10 points)[Points will be subtracted for interpretations that do not provide information about 1) the internal meaning of the ratio and/or 2) benchmarking information about your hospital.]
The average age of plant resolves how long the organization's plants are there where lower ratio shows newer business's buildings and equipment.
In the case of Columbus regional Hospital. it could be said that hospital has newer fixed assets as compared to its industry peers as indicated by the lower average age of plant therefore, it could be said that hospital is using more new technology and it will take longer time than its industry peers make large capital expenditures in the near future.
e. Asset Management Summary. [In this section, provide a detailed summary of the asset managementstatus of your Adopted facility.Doing so here will facilitate the preparation of your final analysis section.]
Attachment:- Columbus_Regional_Hospital.rar