July 23rd, 2014
David Lang Ratio Computation for Patton-Fuller Community Hospital Virtual Organization
In this paper, we will review the financial statements of the Patton-Fuller Hospital Virtual Organization. It will consist of computing eight different ratios based on unaudited financial statements, and we will then critique its operating results and financial position. The comparison of the unaudited and audited statements will be confirmed. There will be an explanation of any changes that occurred, and we will also suggest some plans that the hospital Board should make for the next year and next five years.
1. Current Ratio The current ratio is a measure that gives an idea of the company’s ability to pay its short-term liabilities (debt) with its short-term assets (cash, inventory, receivable). The current ratio equals current assets divided by current liabilities. For instance, the Patton Fuller Community Hospital ratio is as follow (unaudited):
Current Assets = $588,767 = 24 to 1
Current Liabilities $23,807
The unaudited financial statement current ratio shows that the hospital is able at 24 to 1 ratio to pay their obligations. Since the ratio is higher than one, it tells us that the company is in good financial health. If we compare this unaudited ratio to the audited ratio we can see a change of ratio. The audited current assets are at $127,867 and the current liabilities are at $23,807. The ratio is represented by a 5 to 1. The ratio in both situations shows an efficiency of the hospital operating cycle and its ability to turn its products into cash. There is a significant change in the ratio when comparing the financial statements. It is important to understand that a high current ratio does not always mean a good thing because it depends on how fast the company can convert into cash their current