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# Associate Level MaterialRatio Analysis FormUse the

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Associate Level Material Ratio Analysis Form Use the table on the next page to complete the Week Eight assignment. In this assignment, you will review the textbook to find the definitions for each ratio. Use the financial statements for Drs. Smith and Brown, located on the student website, to perform the calculations and complete the form. Review the following example on how to perform the inventory turnover calculation, which shows you how to complete the table. • Two different methods can determine the inventory turnover ratio. o Cost of goods sold—operating revenue of a hospital—divided by ending inventory o Total revenues plus net nonoperating gains divided by ending inventory This example uses the first method to perform the calculation. Because a hospital provides a service, we would find the number that reflects services provided. Total operating revenue reflects money that is earned for providing services. Locate the Statement of Net Income on the student website. Find the total operating revenue. This is \$180,000. Then, locate the ending inventory number. To find the ending Inventory, use the Balance Sheet on the student website. The ending inventory number is XXXXX Cost of goods sold—operating revenue: 180,000 divided by ending inventory of 5000; 180,000/5000 = 36 • Place this information in the table. You will do the same with the rest of the ratios. Take the result of your calculations and place in the grid, as in the example. • In addition, you are responsible for stating whether the ratios are solvency, leverage, or profitability ratios. Enter your answers in the appropriate column. Then, explain what these ratios tell us about the physician group practice. Note. You will use the financial statements of Drs. Smith & Brown to perform the calculations on the next page. To calculate the debt service coverage ratio, you need the maximum annual debt service, which is \$22,200. The following table shows the median financial ratios for acute care hospitals. You can use this table to gauge the financial viability of the physician group practice. Ratio Numbers from Arcadia financial statement Result Is it a liquidity, solvency, or profitability ratio? Define the ratio and explain what the result shown in Column 3 means to the organization. Do not forget to provide your references at the bottom of the form. Inventory turnover (Example) 180,000/5000 36 N/A Inventory turnover is calculated to determine how quickly the inventory is used based on the services rendered. If the inventory turnover is high, this means the hospital does not have enough inventories on hand to accommodate the patient load. For this example, the hospital is turning over their inventory 36 times per year, which is about 3 times a month. The opposite is true if the inventory turnover calculation is lower than the median. This could mean that there is a build-up of inventory due to lower than expected patient revenues. Current ratio Quick ratio Debt service coverage ratio /22,200 Operating margin Return on total assets **** I don't know how to upload the balance sheet that is needed to complete this assignment. It is an adobe pdf. I can email it though if you have an email address. This is due Sunday 5/20/12 by 9pm.
Submitted: 2 years ago.
Category: Business and Finance Homework
Expert:  F. Naz replied 2 years ago.

Welcome to JA, have a nice day.

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F. Naz, Bachelor's Degree
Satisfied Customers: 4257
Experience: Have completed B.COM and CA Finalist
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Customer: replied 2 years ago.

just wondering if you used the attached drs. smith and brown statement of net income to get the answers or if you used something else because the answers are supposed to be gotten from this financial statement. Let me know if you got it!

Customer: replied 2 years ago.

Sorry uploaded the wrong format. here are the balance sheets.

Drs. Smith and Brown

Statement of Net
Income

For the three months
ending in Mar. 12, 20__

Revenue

Net
Patient Service Revenue 180,000

Other
revenue -0-

Total Operating Revenue 180,000

Expenses

Nursing / PA Salaries 16,650

Clerical Salaries 10,150

Payroll taxes / Employee benefits 4,800

Medical Supplies and drugs 15,000

Professional fees 3,000

Dues and Publications 2,400

Janitorial service 1,200

Office Supplies 1,500

Repairs and Maintenance 1,200

Utilities and telephone 6,000

Depreciation 30,000

Interest 3,100

Other 5,000

Total Expenses 100,000

Income from Operations 80,000

Nonoperating gains (losses) -0-

Interest
Income

Nonoperating gains, net -0-

Net Income 80,000

Drs. Smith and Brown

Balance sheet

Mar. 31, 20__

Assets

Current Assets

Cash and Cash equivalents 25,000

Patients accounts receivable 40,000

Inventories - supplies and drugs 5,000

Total Current Assets 70,000

Property Plant and equipment

Buildings
and improvements 500,000

Equipment 800,000

Total 1,300,000

Less accumulated depreciation (480,000)

Net depreciable assets 820,000

Land 100,000

Propert, Plant and equipment, Net 920,000

Other assets 10,000

Total assets 1,000,000

Liabilities and capital

Current Liabilities

Current
Maturities of long term debt 10,000

Accounts
Payable and Accrued Expenses 20,000

Total current liabilities 30,000

Long term debt 180,000

Less current portion of long term debt (10,000)

Net Long-term debt 170,000

Total liabilities 200,000

Capital 800,000

Total liabilities and capital 1,000,000

Drs. Smith and Brown

Statement of changes
in capital

For the three months
ended Mar.31, 20__

Beginning balance 720,000

Net Income 80,000

Ending Balance 800,000

Expert:  F. Naz replied 2 years ago.
I have used the same income statement and balance sheet, thanks.

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