Ratio Optum & CMS Median Ratio Hospital Industry 1-99 beds 100-199 beds 200-299 beds 300-399 beds 400+ beds Desired position Liquidity Ratios Current ratio 2.11 2.18 2.04 1.88 1.71 1.84 Above Quick ratio 1.52 1.65 1.39 1.27 1.42 1.50 Above Acid test ratio 0.30 0.35 0.18 0.20 0.20 0.38 Above Days in account rec. 49 47 45 44 48 44 Below Days cash on hand 86 85 81 102 76 119 Above Average pmt period, days 50 45 51 56 53 52 Below Revenue, expense, and profitability ratios Operating revenue per adjusted $7,448 $7,086 $6,407 $6,766 $7,121 $7,517 Above Operating expense per adjusted $7,197 $6,494 $6,112 $6,260 $6,819 $7,399 Below Salary and benefit expense as a percentage of operating expense 40% 40% 38% 38% 38% 38% Below Operating Margin 0.03 0.02 0.03 0.04 0.04 0.04 Above Nonoperating revenue 0.04 0.05 0.03 0.05 0.07 0.17 Varies Return on total assets 0.04 0.04 0.04 0.04 0.05 0.05 Above Return on nets assets 0.08 0.08 0.08 0.09 0.10 0.09 Above Activity ratios Total asset turnover ratio 1.07 1.19 1.03 0.99 1.03 1.06 Above Net assets turnover ratio 2.12 2.17 2.03 2.11 2.04 2.21 Above Age of plant ratio 10.31 10.41 10.12 11.97 10.93 11.19 Below Capital structure ratios Long-term debt to net assets ratio 0.21 0.18 0.31 0.42 0.38 0.59 Below Net assets to total assets ratio 0.54 0.58 0.51 0.47 0.52 0.48 Above Times interest earned ratio 3.78 3.47 3.43 3.64 4.43 5.13 Above Debt service coverage ratio 3.18 3.51 3.63 3.50 6.36 4.24 Above . Horizontal, vertical, and ratio analyses. Exhibits 4.29a and 4.29b show the statement of operations and balance sheet for Resort Hospital for 20X1 and 20X0. The debt principal payment each year for Resort is $1,300,000, and its adjusted discharges are 6,500 for 20X0 and 5,500 for 20X1. a.Perform horizontal and vertical analyses on the balance sheet using the statement of operations. b. Perform horizontal and vertical analyses using the balance sheet. c. Compute all the selected ratios listed in Exhibit 4.16a. Evaluate the financial state of Resort Hospital, a 60-bed facility, using all of the above measures. Make the basis for the vertical analysis the year 20X0. Resort Hospital Statement of Operations for the Years Ended December 31, 20X1 and 20X0 (in thousands) Particulars 20x1 20x0 Revenues Net patient service revenue $33,500 $30,500 Other operating revenue 2,600 2,500 Total operating revenues 36,100 33,000 Expenses Salaries and benefits 23,500 19,600 Supplies and other expenses 11,400 10,500 Depreciation 700 700 Interest 710 710 Total operating expenses 36,310 31,510 Operating income (210) 1,490 Nonoperating revenue 6,500 1,200 Excess of revenue over expenses $6,290 $2,690 Exhibit 4.27b Balance Sheet for Resort Hospital Particulars 20x1 20x0 Current assets Cash and cash equivalents $1,500 $2,500 Net patient A/R 6,500 4,800 Inventories 400 350 Prepaid expense 350 250 Total current assets 8,750 7,900 Plant, property, and equipment Gross plant, property, and equipment 22,000 19,500 Less Accumulated depreciation) (12,700.

1. Ratio
Optum & CMS Median Ratio Hospital Industry
1-99 beds
100-199 beds
200-299 beds
300-399 beds
400+ beds
Desired position
Liquidity Ratios
Current ratio
2.11
2.18
2.04
1.88
1.71
1.84
Above
Quick ratio
1.52
1.65
1.39
1.27
1.42
1.50
Above
Acid test ratio
0.30
0.35
0.18
0.20
0.20
0.38
Above
Days in account rec.
49

2. 47
45
44
48
44
Below
Days cash on hand
86
85
81
102
76
119
Above
Average pmt period, days
50
45
51
56
53
52
Below
Revenue, expense, and profitability ratios
Operating revenue per adjusted
$7,448
$7,086
$6,407
$6,766
$7,121
$7,517
Above
Operating expense per adjusted
$7,197
$6,494
$6,112
$6,260

3. $6,819
$7,399
Below
Salary and benefit expense as a percentage of operating expense
40%
40%
38%
38%
38%
38%
Below
Operating Margin
0.03
0.02
0.03
0.04
0.04
0.04
Above
Nonoperating revenue
0.04
0.05
0.03
0.05
0.07
0.17
Varies
Return on total assets
0.04
0.04
0.04
0.04
0.05
0.05
Above
Return on nets assets

4. 0.08
0.08
0.08
0.09
0.10
0.09
Above
Activity ratios
Total asset turnover ratio
1.07
1.19
1.03
0.99
1.03
1.06
Above
Net assets turnover ratio
2.12
2.17
2.03
2.11
2.04
2.21
Above
Age of plant ratio
10.31
10.41
10.12
11.97
10.93
11.19
Below
Capital structure ratios
Long-term debt to net assets ratio
0.21
0.18

5. 0.31
0.42
0.38
0.59
Below
Net assets to total assets ratio
0.54
0.58
0.51
0.47
0.52
0.48
Above
Times interest earned ratio
3.78
3.47
3.43
3.64
4.43
5.13
Above
Debt service coverage ratio
3.18
3.51
3.63
3.50
6.36
4.24
Above
. Horizontal, vertical, and ratio analyses. Exhibits 4.29a and 4.29b show the statement of
operations and balance sheet for Resort Hospital for 20X1 and 20X0. The debt principal payment
each year for Resort is $1,300,000, and its adjusted discharges are 6,500 for 20X0 and 5,500 for
20X1.
a.Perform horizontal and vertical analyses on the balance sheet using the statement of operations.
b. Perform horizontal and vertical analyses using the balance sheet.
c. Compute all the selected ratios listed in Exhibit 4.16a.

6. Evaluate the financial state of Resort Hospital, a 60-bed facility, using all of the above measures.
Make the basis for the vertical analysis the year 20X0.
Resort Hospital
Statement of Operations for the Years Ended December 31, 20X1 and 20X0 (in thousands)
Particulars
20x1
20x0
Revenues
Net patient service revenue
$33,500
$30,500
Other operating revenue
2,600
2,500
Total operating revenues
36,100
33,000
Expenses
Salaries and benefits
23,500
19,600
Supplies and other expenses
11,400
10,500
Depreciation
700
700
Interest
710
710
Total operating expenses
36,310
31,510
Operating income
(210)
1,490

7. Nonoperating revenue
6,500
1,200
Excess of revenue over expenses
$6,290
$2,690
Exhibit 4.27b Balance Sheet for Resort Hospital
Particulars
20x1
20x0
Current assets
Cash and cash equivalents
$1,500
$2,500
Net patient A/R
6,500
4,800
Inventories
400
350
Prepaid expense
350
250
Total current assets
8,750
7,900
Plant, property, and equipment
Gross plant, property, and equipment
22,000
19,500
Less Accumulated depreciation)
(12,700)
(12,000)
Net property, plant, and equipment
9,300
7,500

8. Long-term investments
16,500
10,500
Total assets
$34,550
$25,900
Current liabilities
Account Payable
$5,300
$3,800
Salaries payable
1,000
900
Total current liabilities
6,300
4,700
Long-term liabilities
Bonds payable
1,200
2,500
Total long-term liabilities
1,200
2,500
Net assets
27,050
18,700
Total liabilities and assets
$34,550
$25,900
Ratio
Optum & CMS Median Ratio Hospital Industry
1-99 beds
100-199 beds
200-299 beds
300-399 beds
400+ beds

9. Desired position
Liquidity Ratios
Current ratio
2.11
2.18
2.04
1.88
1.71
1.84
Above
Quick ratio
1.52
1.65
1.39
1.27
1.42
1.50
Above
Acid test ratio
0.30
0.35
0.18
0.20
0.20
0.38
Above
Days in account rec.
49
47
45
44
48
44
Below
Days cash on hand
86

10. 85
81
102
76
119
Above
Average pmt period, days
50
45
51
56
53
52
Below
Revenue, expense, and profitability ratios
Operating revenue per adjusted
$7,448
$7,086
$6,407
$6,766
$7,121
$7,517
Above
Operating expense per adjusted
$7,197
$6,494
$6,112
$6,260
$6,819
$7,399
Below
Salary and benefit expense as a percentage of operating expense
40%
40%
38%
38%

11. 38%
38%
Below
Operating Margin
0.03
0.02
0.03
0.04
0.04
0.04
Above
Nonoperating revenue
0.04
0.05
0.03
0.05
0.07
0.17
Varies
Return on total assets
0.04
0.04
0.04
0.04
0.05
0.05
Above
Return on nets assets
0.08
0.08
0.08
0.09
0.10
0.09
Above
Activity ratios

12. Total asset turnover ratio
1.07
1.19
1.03
0.99
1.03
1.06
Above
Net assets turnover ratio
2.12
2.17
2.03
2.11
2.04
2.21
Above
Age of plant ratio
10.31
10.41
10.12
11.97
10.93
11.19
Below
Capital structure ratios
Long-term debt to net assets ratio
0.21
0.18
0.31
0.42
0.38
0.59
Below
Net assets to total assets ratio
0.54
0.58

13. 0.51
0.47
0.52
0.48
Above
Times interest earned ratio
3.78
3.47
3.43
3.64
4.43
5.13
Above
Debt service coverage ratio
3.18
3.51
3.63
3.50
6.36
4.24
Above
Solution
Particulars 20x1 20x0 Horizontal Analysis Vertical Analysis Ratio 20x1 20x0 Optum & CMS
Median Ratio Hospital Industry 1-99 beds Desired position Revenues Amount Percent Percent
20x1 Percent 20x0 Liquidity Ratios Net patient service revenue 33,500 30500 3000 9.84
92.80 92.42 Current ratio 1.39 1.68 2.11 2.18 Above Other operating revenue 2,600 2,500 100
4.00 7.20 7.58 Quick ratio 1.33 1.61 1.52 1.65 Above Total operating revenues 36,100 33,000
3,100 9.39 100.00 100.00 Acid test ratio 1.27 1.55 0.3 0.35 Above Expenses Days in
account rec. 65.72 53.09 49 47 Below Salaries and benefits 23,500 19,600 3,900 19.90 65.10
59.39 Days cash on hand 15.37 29.62 86 85 Above Supplies and other expenses 11,400 10,500
900 8.57 31.58 31.82 Average pmt period, days 53.28 44.02 50 45 Below Depreciation 700
700 0 0.00 1.94 2.12 Revenue, expense, and profitability ratios Interest 710 710 0 0.00 1.97
2.15 Operating revenue per adjusted 6.56 5.08 $7,448 $7,086 Above Total operating expenses
36,310 31,510 4,800 15.23 100.58 95.48 Operating expense per adjusted 6.60 4.85 $7,197
$6,494 Below Operating income -210 1,490 -1,700 -114.09 -0.58 4.52 Salary and benefit

14. expense as a percentage of operating expense 64.72 62.20 40% 40% Below Nonoperating
revenue 6,500 1,200 5,300 441.67 18.01 3.64 Operating Margin -0.58 4.52 0.03 0.02 Above
Excess of revenue over expenses 6,290 2690 3600 133.83 17.42 8.15 Nonoperating revenue
0.15 0.04 0.04 0.05 Varies Return on total assets 0.01 0.08 0.04 0.04 Above Particulars
20x1 20x0 Return on nets assets 0.02 0.12 0.08 0.08 Above Current assets Activity
ratios Cash and cash equivalents 1,500 2500 -1000 -40.00 4.34 9.65 Total asset turnover
ratio 1.23 1.32 1.07 1.19 Above Net patient A/R 6,500 4,800 1,700 35.42 18.81 18.53 Net
assets turnover ratio 1.57 1.83 2.12 2.17 Above Inventories 400 350 50 14.29 1.16 1.35 Age of
plant ratio 10.31 10.41 Below Prepaid expense 350 250 100 40.00 1.01 0.97 Capital structure
ratios Total current assets 8,750 7,900 850 10.76 25.33 30.50 Long-term debt to net assets
ratio 0.04 0.13 0.21 0.18 Below Net assets to total assets ratio 0.78 0.72 0.54 0.58 Above
Plant, property, and equipment Times interest earned ratio 9.86 4.79 3.78 3.47 Above
Gross plant, property, and equipment 22,000 19,500 2,500 12.82 63.68 75.29 Debt service
coverage ratio 3.83 2.04 3.18 3.51 Above Less Accumulated depreciation) -12,700 -12,000 -
700 5.83 -36.76 -46.33 Net property, plant, and equipment 9,300 7,500 1,800 24.00 26.92
28.96 Long-term investments 16,500 10,500 6,000 57.14 47.76 40.54 Total assets
34,550 25900 8650 33.40 100.00 100.00 Current liabilities Account
Payable 5,300 3800 1500 39.47 15.34 14.67 Salaries payable 1,000 900 100 11.11 2.89
3.47 Total current liabilities 6,300 4,700 1,600 34.04 18.23 18.15 Long-term
liabilities Bonds payable 1,200 2,500 -1,300 -52.00 3.47 9.65 Total long-term
liabilities 1,200 2,500 -1,300 -52.00 3.47 9.65 Net assets 27,050 18,700 8,350 44.65 78.29
72.20 Total liabilities and assets 34,550 25900 8,650 33.40 100.00 100.00