MMHA 6400 – Ratio Analysis

MMHA 6400 – Ratio Analysis
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Assignment 1: Ratio Analysis

Note: The Instructor will post the document for this Assignment by Day 1 of Week 8.

It is important to understand that when interpreting financial statements, the numbers alone may not provide the whole financial picture of an organization. Instead, you must analyze the statements using ratios, which are then compared to benchmarks across the health care industry. For this Assignment, examine the financial health of a community hospital.

To prepare for this Assignment:

Review the Week 8 Assignment 1 document provided to you by the Instructor. Examine the financial statements from the community hospital. Reflect on how you will use this financial data to calculate and analyze the organization’s financial ratios. Refer to Chapter 4 of Financial Management of Health Care Organizations: An Introduction to Fundamental Tools, Concepts and Applications for additional guidance.

The Assignment:

Using the statement of operations and balance sheet for the community hospital, complete the “Week 8 Ratio Excel Template”.

Week 8 Assignment 1 — Franklin Community Hospital

Assignment 1: Ratio Analysis

It is important to understand that when interpreting financial statements, the numbers alone may not provide the whole financial picture of an organization. Instead, you must analyze the statements using ratios, which are then compared to benchmarks across the healthcare industry. For this Assignment, you examine the financial documents for Franklin Community Hospital and analyze the organization’s financial health.

Franklin Community Hospital

Franklin Community Hospital is a small community hospital serving a rural population. The adjusted discharges are 3.30 for the 1st year and 3.10 for the 2nd.

Franklin Community Hospital Statement of Operations (in thousands) for the Years Ended December 31, 2016 and 2017

2016

2017

Revenues

Net patient service revenue \$22,000

\$19,000

Net assets released from restriction 1,000

800

Total operating revenues 23,000

19,800

Expenses Salaries and benefits 11,000

8,000

Supplies and other expenses 7,000

6,000

Depreciation 2,500

2,100

General services 300

520

Total operating expenses 20,800

16,620

Operating income 1,250

4,200

Non-operating income 3,500

2,200

Excess of revenues over expenses 4,750

6,400

Increase (decrease) in net assets \$4,750

\$6,400

Franklin Community Hospital Balance Sheet (in thousands) for the Years Ended December 31, 2016 and 2017

2016

2017

Current assets

Cash and cash equivalents

\$600

\$400

Net patient receivables 4,000

3,500

Inventory 1,000

900

Total current assets 5,600

4,800

Non-current assets Plant, property, and equipment Gross plant, property, and equipment 25,000

23,000

(less accumulated depreciation)

(18,000)

(17,000)

Net plant, property, and equipment

7,000

6,000

Board-designated funds 19,000

10,000

Total assets 31,600

20,800

Current liabilities Accounts payable 2,600

2,100

Accrued expenses 850

900

Total current liabilities 3,450

3,000

Long-term liabilities Bonds payable 5,600

7,150

Total long-term liabilities 5,600

7,150

Net assets 22,550

10,650

Total liabilities and net assets \$31,600

\$20,800

To prepare for this Assignment:

Examine the financial statements from Franklin Community Hospital. Reflect on how you will use this financial data to calculate and analyze the organization’s financial ratios. Refer to Chapter 4 of Financial Management of Health Care Organizations: An Introduction to Fundamental Tools, Concepts and Applications for additional guidance.

The Assignment:

Using the statement of operations and balance sheet for Franklin Community Hospital below, complete the “Week 8 Assignment 1 Ratio Excel Template”.

Your Assignment is due by Day 7 of Week 8.

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