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Assignment 2.2: Ratio Analysis

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Assignment 2.2: Ratio Analysis
Assignment 2.2: Ratio Analysis

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Part 1:

Enter the information based on your computations.

| 2011 | 2010 | Benchmark | Favorable (F), Unfavorable (U), or Approximate (A)? 2011/2010 | 1. Current ratio | 3.52 | 2.59 | 2.00 | Favorable | 2. Days cash on hand | 27.64 | 18.10 | 15.00 | Favorable | 3. Days in A/R | 69.32 | 76.59 | 45.00 | Favorable | 4. Operating margin | 2.18% | 3.03% | 4% | Unfavorable | 5. Return on total assets | 5.08% | 7.13% | 4% | Unfavorable | 6. Return on net assets | 14.54% | 17.76% | 10% | Unfavorable | 7. Debt to capitalization | 61.21% | 53.69% | 50% | Unfavorable | 8. Times interest earned | 2.47 | 3.36 | 4.00 | Unfavorable | 9. Debt service coverage | 1.28 | 1.30 | 2.00 | Approximate | 10. Fixed asset turnover | 3.28 | 2.88 | 3.00 | Favorable | 11. Salary and benefit/NPSR | 84.08% | 82.82% | 55% | Unfavorable |

1. Current ratio = Total Current Assets in Balance Sheet / Total Current Liabilities in Balance
Sheet

2011 | 2010 | $54,306/$15,425 | $39,715/$15,315 | 3.52 | 2.59 | 2. Days Cash on Hand = Cash and Cash Equivalents from Balance Sheet / [(Total Expenses –
Depreciation – Provision for Bad Debts in Statement of Operations) / 365]

2011 | 2010 | $12,102/[($168,232 - $6,405 - $2,000)/365] | $6,486/[($138,394 - $5,798 - $1,800)/365] | $12,102/[$159,827/365] | $6,486/[$130.796/365] | $12,102/437.88 | $6,486/358.34 | 27.64 | 18.10 |

3. Days in A/R = Net Patient Accounts Receivable in Balance Sheet / (Net Patient Service
Revenue in Statement of Operations / 365)

2011 | 2010 | $28,509/($150,118/365) | $25,927/$123,565/365) | $28,509/411.28 | $25,927/338.53 | 69.32 | 76.59 |

4. Operating margin = Operating Income from Statement of Operations / Total Revenues in
Statement of Operations

2011 | 2010 | $3,747/$171,979 | $4,330/$142,724 | .0218 x 100 | .0303 X 100 | 2.18% | 3.03% |

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