Some help for Break-even analysis

1. HC FIN571
Grant Clinic, Inc. Financial
Plan and Presentation
Presented by

2. Introduction
2 CONFIDENTIAL

3. Objectives
• SWOT Analysis
• External Pressures
• External Pressures the next three years
• Preventive Measures
• Risk
• Growth Opportunities
• Ratio Calculation
• Capital Budget for equipment
3 CONFIDENTIAL

4. SWOT Analysis
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5. Strengths
• Grant clinic, Inc. is a profitable organization with a good source of
working capital and financial resources available. The cash-on-
hand for 90 days is acceptable, and the organization has a good
level of investment income for future costs and financial planning
of resources. The organization has a credit line of $75,000
currently available, and the loan has been approved through the
bank, in case of any potential financial risks. The clinic has a
greater proportion of assets to debt ratio and their equity ratio is
expected to increase within the next 2 years. The clinic has strong
ties to the community, and has made huge efforts to raise their
level of working capital, through donations, organizational
memberships, and fundraising events.
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6. Weaknesses
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7. External Pressures
7 CONFIDENTIAL

8. External Pressures for the
next three years
8 CONFIDENTIAL

9. Preventive Measures
9 CONFIDENTIAL

10. Risk
10 CONFIDENTIAL

11. Growth Opportunities
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12. 12 CONFIDENTIAL

13. Financial Overview
Grant Clinic, Inc. 2010 Financial Overview
Existing Services
Existing Services
per visit Total
Number of patients 28,000.00
Revenue from patient visits $ 48.00 $ 1,344,000.00
Variable expenses
Medical supplies
($159,000/28,000) $ 5.68 $ 159,000.00
Service bureau
($28,000/28,000) $ 1.00 $ 28,000.00
Other Operating Expenses
($88,000/28,000) $ 3.14 $ 88,000.00
Physician fee-for-service
($552,000/28,000) $ 19.71 $ 552,000.00
Total variable expenses $ 29.54 $ 827,000.00
Contribution margin
CM=($48.00-$29.53) $ 18.46 $ 517,000.00
Fixed expenses
Administration and technician salaries $ 198,000.00
Nursing salaries $ 195,000.00
Rent $ 48,000.00
Service Bureau $ 24,000.00
Other fixed expenses $ 70,000.00
Depreciation expense $ 16,000.00
Total fixed expenses $ 551,000.00
Net income $ (34,000.00)
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14. Break-even Analysis
Grant Clinic, Inc. Break-Even Analysis
Q = FC / P - VC
$551,000 / $48.00 - $29.534
$551,000 / 18.466
29838.62 - Number of patient visits needed to break-even
(-1838.62) - Shortage number of patients
28,000 number of visits / 6,000 patients = 4.667 (Number of visits per patient annually)
1,838.62 / 4.667 = 393.96 additional patients needed to break-even
14 CONFIDENTIAL

15. ‘09-’10 Statement of Financial Position
Grant Clinic, Inc.
Statement of Financial Position, December 31, 2009 to December 31, 2010
Assets
Current assets
Cash $ 10,000.00
Patient Receivables $ 160,000.00
Supplies $ 4,000.00
Total current assets $ 174,000.00
Plant & Equipment
Equipment $ 80,000.00
Less: Accumlated Depreciation $ (16,000.00)
Total Assets $ 238,000.00
Liabilities
Current liabilities
Accounts payable: Supplies $ 10,000.00
Accounts payable: Service Bureau $ 2,500.00
Total current liabilities $ 12,500.00
Long-term debt $ 5,000.00
Total liabilities $ 17,500.00
Partners' Equity $ 220,500.00
Total liabilities & partners' equity $ 238,000.00
15 CONFIDENTIAL

16. Ratio Calculation
Grant Clinic, Inc.
Financial Ratios 2010
Ratio Formula Result
Return on investment (ROI) Net income / Investment (-34,000 / 75,000) = -45.3%
Net income - (Net income *
Residual income (RI) Min. desired return) (-34000 - (-34000 * .15)) = -$28,900
Break-even analysis Fixed costs / Price - Variable costs $551,000 / $48.00 - $29.54 = 29,848.32
Working capital Current assets - Current liabilities $174,000 - $12,500 = $161,500
Liquidity Ratios
Current Current assets / Current Liabilities $174,000 / $12,500 = 13.92
Current assets - Inventories /
Quick Current liabilities $174,000 - $80,000 / $12,500 = 7.52
Working capital Current assets - Current liabilities / Sales $174,000 - $12,500 / $1,344,000 = 12.01%
Cash Cash and cash equivalents / Total assets $10,000 / $238,000 = 4.20%
Asset Activity Ratio
Total asset turnover Sales / Total assets $1,344,000 / $238,000 = 5.64
Profitability Ratio
Return on assets (ROA) Net income / Total assets (-$34,000 / $238,000) = -.14.28%
16 CONFIDENTIAL

17. Table
10
9
8 Patient #1
7
6 Patient #2
Rating
5
4 Patient #3
3
2
1
0
1 2 3 4 Overall
Question
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18. Proposed Capital Budget
for Equipment
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19. Conclusion
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20. References
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