Week 4 Checkpoint -- Ratio Analysis

Week 4 Checkpoint -- Ratio Analysis - the hospitals...

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Week 4 Checkpoint: Ratio Analysis Arcadia Hospital’s current ratio is: 6900/3200 = 2.2 Arcadia Hospital’s current total asset is: 5681/17900 = 0.03 Since Arcadia’s current ratio is above the median average of 2.07 they have a larger amount of cash on hand and marketable securities. With their current total asset being 0.03 they are well below the average of 1.01 which means that their revenue generation is fairly poor from their asset base. Arcadia Hospital’s asset/equity: 17900/7900 = 2.27 Arcadia Hospital’s long-term debt/equity: 10000/7900 = 1.26 Arcadia Hospital’s total margin: 32/568 = 5.63 Asset/equity and long-term debt/equity are called leverage ratios. Asset/equity is known as a capital structure. The choice between the mix of equity and debt financing will determine
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Unformatted text preview: the hospitals financial structure. The long-term debt/equity is coverage that gives the hospital the choice of how much interest they want to pay out. The hospitals cash flow in and out will determine which interest obligations are met and which are not. The total margin is known as a profitability ratio that shows the amount of profit earned from each dollar. The total margin gives information about the hospitals ability to keep their unit prices up, but does not give information on the hospitals ability to generate any kind of economic return. The asset/equity ratio above 1.0 shows that the hospital is actually in debt and that each dollar of the hospitals equity controlled $2.27 of it’s total assets....
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This note was uploaded on 07/30/2011 for the course HCA 270 taught by Professor Kulick during the Spring '10 term at University of Phoenix.

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Week 4 Checkpoint -- Ratio Analysis - the hospitals...

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