Companies typically report compensating balances that are required under a loan agreement as unrestricted cash classified within current assets. a. For purposes of financial statement analysis, is this a useful classification? Explain. b. Describe how you evaluate compensating balances
Companies typically report compensating balances that are required under a loan agreement as unrestricted cash classified within current assets. a. For purposes of financial statement analysis, is this a useful classification? Explain. b. Describe how you evaluate compensating balances
Related questions
Explain how the ratios help identify the strengths and weaknesses of the facility and the management team.
The students will use Financial Ratios to analyze a potential strategic acquisition.
The student will use the Financial Ratios to evaluate the current management teamâs ablity to make good long term and short term decisions. Should Acme continue to employ the current management team. If Beechtree is acquired, do we keep its management team or do build a new one
| Ratio | Formula | Standard | Beechtree |
| Current Ratio (Liquidity) | Current Assets/Current Liabilities | 1.3 | 1.15 |
| Quick Ratio (liquidity) | (Current Assets-Supplies on hand)/Current Liabilities | 1.2 | .9 |
| Days Cash on Hand (liquidity) | (Cash on Hand +Market Securities)/((Tot Operating Exp-Depreciation Exp)/365) | 50 | 35 |
| Days in Net Receivable (liquidity) | (Accounts Receivable +Notes Receivable + Other Receivable-allowance for uncollectable)/(Tot Operating Revenue/365) | 49 | 65 |
| Debt Service Coverage Ratio (solvency) | Net Operating Income/(Principal +interest + lease payment | >1 | .89 |
| Operating Margin (profitability) | Operating Income/Total Operating Revenue | >.05 | -.005 |
| Return on Total Assets (profitability) | Net Operating Income/Total Assets | 1.1 | .9 |
Net Operating Income for this financial statement=Decrease in unrestricted net assets + Interest Expense + Depreciation
Perform trend analysis on the MHS statement of revenue and expenses.
APPENDIX 28-A Metropolis Health Systemâs Financial Statements and Excerpts from Notes
| Metropolis Health System Balance Sheet March 31, 20X3 and 20X2 | ||
| Assets | ||
| Current Assets | ||
| Cash and cash equivalents | $1,150,000 | $400,000 |
| Assets whose use is limited | 825,000 | 825,000 |
| Patient accounts receivable | 8,700,000 | 8,950,000 |
| Less allowance for bad debts | (1,300,000) | (1,300,000) |
| Other receivables | 150,000 | 100,000 |
| Inventories of supplies | 900,000 | 850,000 |
| Prepaid expenses | 200,000 | 150,000 |
| Total Current Assets | 10,625,000 | 9,975,000 |
| Assets Whose Use Is Limited | ||
| Corporate funded depreciation | 1,950,000 | 1,800,000 |
| Under bond indenture agreementsâheld by trustee | 1,425,000 | 1,475,000 |
| Total Assets Whose Use Is Limited | 3,375,000 | 3,275,000 |
| Less Current Portion | (825,000) | (825,000) |
| Net Assets Whose Use Is Limited | 2,550,000 | 2,450,000 |
| Property, Plant, and Equipment, Net | 19,300,000 | 19,200,000 |
| Other Assets | 325,000 | 375,000 |
| Total Assets | $32,800,000 | $32,000,000 |
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| Metropolis Health System Balance Sheet March 31, 20X3 and 20X2 | ||
| Liabilities and Fund Balance | ||
| Current Liabilities | ||
| Current maturities of long-term debt | $525,000 | $500,000 |
| Accounts payable and accrued expenses | 4,900,000 | 5,300,000 |
| Bond interest payable | 300,000 | 325,000 |
| Reimbursement settlement payable | 100,000 | 175,000 |
| Total Current Liabilities | 5,825,000 | 6,300,000 |
| Long-Term Debt | 6,000,000 | 6,500,000 |
| Less Current Portion of Long-Term Debt | (525,000) | (500,000) |
| Net Long-Term Debt | 5,475,000 | 6,000,000 |
| Total Liabilities | 11,300,000 | 12,300,000 |
| Fund Balances | ||
| General Fund | 21,500,000 | 19,700,000 |
| Total Fund Balances | 21,500,000 | 19,700,000 |
| Total Liabilities and Fund Balances | $32,800,000 | $32,000,000 |
1. Your unitâs gross charges for the period to date amount to $200,000.
2. The uniform gross charge for each procedure in your unit is $100.
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3. The unit receives revenue from four major payers. The number of procedures performed for the period totals 2,000. Of that total, the number of procedures per payer (stated as a percentage) is as follows:Payer 1 = 30%Payer 2 = 40%Payer 3 = 20%Payer 4 = 10%
4. The following contractual payment arrangements are in effect for the current period. The percentage of the gross charge that is currently paid by each payer is as follows:Payer 1 = 80% [Medicare]Payer 2 = 70% [Commercial managed care plans]Payer 3 = 50% [Medicaid]Payer 4 = 90% [Self-pay]
Q: How many procedures are attributed to each payer?
Q: How much is the net revenue per procedure for each payer, and how much is the contractual allowance per procedure for each payer?
Q: How much is the total net revenue for each payer, and how much is the total contractual allowance for each payer?
