How well am i doing? --- financial statement analysis, limitations of financial statement analysis, statements in comparative and common-size forms, dollar and percentage changes on statements, horizontal analysis, trend analysis, common-size statements, ratio analysis. different types of ratios with examples.
Fixed Capital Evaluation PowerPoint Presentation SlidesSlideTeam
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How well am i doing? --- financial statement analysis, limitations of financial statement analysis, statements in comparative and common-size forms, dollar and percentage changes on statements, horizontal analysis, trend analysis, common-size statements, ratio analysis. different types of ratios with examples.
Fixed Capital Evaluation PowerPoint Presentation SlidesSlideTeam
Presenting this set of slides with name - Fixed Capital Evaluation Powerpoint Presentation Slides. This complete deck is oriented to make sure you do not lag in your presentations. Our creatively crafted slides come with apt research and planning. This exclusive deck with fourty slides is here to help you to strategize, plan, analyse, or segment the topic with clear understanding and apprehension. Utilize ready to use presentation slides on Fixed Capital Evaluation Powerpoint Presentation Slides with all sorts of editable templates, charts and graphs, overviews, analysis templates. It is usable for marking important decisions and covering critical issues. Display and present all possible kinds of underlying nuances, progress factors for an all inclusive presentation for the teams. This presentation deck can be used by all professionals, managers, individuals, internal external teams involved in any company organization.
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Fixed Capital Analysis PowerPoint Presentation SlidesSlideTeam
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Basic principle of financial statement analysiskhomsasatun
the basic principle of financial statement analysis. purpose's analysis, method of financial statement analysis, and technic of financial statement analysis
Consumption Of Fixed Capital PowerPoint Presentation Slides SlideTeam
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Fixed Capital Analysis PowerPoint Presentation SlidesSlideTeam
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Basic principle of financial statement analysiskhomsasatun
the basic principle of financial statement analysis. purpose's analysis, method of financial statement analysis, and technic of financial statement analysis
Your answer is incorrect. Try again.Prepare a comparati.docxdanielfoster65629
Your answer is incorrect. Try again.
Prepare a comparative balance sheet of Gilmour Company showing the dollar change and the percent change for each item. (Round percentages to 2 decimal places, e.g. 2.25%. If $ or % change are in decrease, enter amounts or percentages using either a negative sign preceding the number e.g. -45, -2.25% or parentheses e.g. (45), (2.25)%.)
GILMOUR COMPANY
Comparative Balance Sheet
December 31, 2013 and 2012
December 31
Increase or (Decrease)
Assets
2013
2012
$ Change
% Change
Cash
$ 180,000
$ 275,000
$
%
$-95,000
-34.55%
Accounts receivable (net)
219,500
155,300
64,200
41.34%
Short-term investments
269,300
149,600
119,700
80.01%
Inventories
1,059,600
979,300
80,300
8.20%
Prepaid expenses
24,750
24,750
0
0.00%
Fixed assets
2,585,200
1,949,400
635,800
32.62%
Accumulated depreciation
( 1,000,500
)
( 750,100
)
-250,400
33.38%
Total
$ 3,337,850
$ 2,783,250
$
%
554,600
19.93%
Liabilities and Stockholders’ Equity
Accounts payable
$ 50,020
$ 74,100
$
%
-24,080
-32.50%
Accrued expenses
170,400
199,400
-29,000
-14.54%
Bonds payable
450,500
189,600
260,900
137.61%
Capital stock
2,100,000
1,769,300
330,700
18.69%
Retained earnings
566,930
550,850
16,080
2.92%
Total
$ 3,337,850
$ 2,783,250
$
%
554,600
19.93%
Your answer is partially correct. Try again.
Answer each of the questions in the following unrelated situations.
(a) The current ratio of a company is 5:1 and its acid-test ratio is 1:1. If the inventories and prepaid items amount to $492,400, what is the amount of current liabilities?
Current Liabilities
$
(b) A company had an average inventory last year of $209,000 and its inventory turnover was 5. If sales volume and unit cost remain the same this year as last and inventory turnover is 9 this year, what will average inventory have to be during the current year? (Round answer to 0 decimal places, e.g. 125.)
Average Inventory
$
(c) A company has current assets of $88,790 (of which $37,160 is inventory and prepaid items) and current liabilities of $37,160. What is the current ratio? What is the acid-test ratio? If the company borrows $13,870 cash from a bank on a 120-day loan, what will its current ratio be? What will the acid-test ratio be? (Round answers to 2 decimal places, e.g. 2.50.)
Current Ratio
:1
Acid Test Ratio
:1
New Current Ratio
:1
New Acid Test Ratio
:1
(d) A company has current assets of $605,100 and current liabilities of $239,000. The board of directors declares a cash dividend of $191,200. What is the current ratio after the declaration but before payment? What is the current ratio after the payment of the dividend? (Round answers to 2 decimal places, e.g. 2.50.)
Current ratio after the declaration but before payment
:1
Current ratio after the p.
C3-67Permtemp Corporation formed in 2012 and, for that year, re.docxRAHUL126667
C:3-67
Permtemp Corporation formed in 2012 and, for that year, reported the following book income statement and balance sheet, excluding the federal income tax expense, deferred tax assets, and deferred tax liabilities:
Sales
$20,000,000
Cost of goods sold
(15,000,000)
Gross profit
$ 5,000,000
Dividend income
50,000
Tax-exempt interest income
15,000
Total income
$ 5,065,000
Expenses:
Depreciation
$ 800,000
Bad debts
400,000
Charitable contributions
100,000
Interest
475,000
Meals and entertainment
45,000
Other
3,855,000
Total expenses
(5,675,000)
Net loss before federal income taxes
$ (610,000)
Cash
$ 500,000
Accounts receivable
$ 2,000,000
Allowance for doubtful accounts
(250,000)
1,750,000
Inventory
4,000,000
Fixed assets
$10,000,000
Accumulated depreciation
(800,000)
9,200,000
Investment in corporate stock
1,000,000
Investment in tax-exempt bonds
50,000
Total assets
$16,500,000
Accounts payable
$2,610,000
Long-term debt
8,500,000
Common stock
6,000,000
Retained earnings
(610,000)
Total liabilities and equity
$16,500,000
Additional information for 2012:
· • The investment in corporate stock is comprised of less-than-20%-owned corporations.
· • Depreciation for tax purposes is $1.4 million under MACRS.
· • Bad debt expense for tax purposes is $150,000 under the direct writeoff method.
· • Limitations to charitable contribution deductions and meals and entertainment expenses must be tested and applied if necessary.
· • Qualified production activities income is zero.
Required for 2012:
· a. Prepare page 1 of the 2012 Form 1120, computing the corporation’s NOL.
· b. Determine the corporation’s deferred tax asset and deferred tax liability situation, and then complete the income statement and balance sheet to reflect proper GAAP accounting under ASC 740. Use the balance sheet information to prepare Schedule L of the 2012 Form 1120.
· c. Prepare the 2012 Schedule M-3 for Form 1120.
· d. Prepare a schedule that reconciles the corporation’s effective tax rate to the statutory 34% tax rate.
Note: For 2012 forms, go to forms and publications, previous years, at the IRS website, www.irs.gov.
For 2013, Permtemp reported the following book income statement and balance sheet, excluding the federal income tax expense, deferred tax assets, and deferred tax liabilities:
Sales
$33,000,000
Cost of goods sold
(22,000,000)
Gross profit
$11,000,000
Dividend income
55,000
Tax-exempt interest income
15,000
Total income
$11,070,000
Expenses:
Depreciation
$ 800,000
Bad debts
625,000
Charitable contributions
40,000
Interest
455,000
Meals and entertainment
60,000
Other
4,675,000
Total expenses
(6,655,000)
Net income before federal income taxes
$ 4,415,000
Cash
$ 2,125,000
Accounts receivable
$ 3,300,000
Allowance for doubtful accounts
(450,000)
2,850,000
Inventory
6,000,000
Fixed assets
$10,000,000
Accum ...
Improving profitability for small businessBen Wann
In this comprehensive presentation, we will explore strategies and practical tips for enhancing profitability in small businesses. Tailored to meet the unique challenges faced by small enterprises, this session covers various aspects that directly impact the bottom line. Attendees will learn how to optimize operational efficiency, manage expenses, and increase revenue through innovative marketing and customer engagement techniques.
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Memorandum Of Association Constitution of Company.pptseri bangash
www.seribangash.com
A Memorandum of Association (MOA) is a legal document that outlines the fundamental principles and objectives upon which a company operates. It serves as the company's charter or constitution and defines the scope of its activities. Here's a detailed note on the MOA:
Contents of Memorandum of Association:
Name Clause: This clause states the name of the company, which should end with words like "Limited" or "Ltd." for a public limited company and "Private Limited" or "Pvt. Ltd." for a private limited company.
https://seribangash.com/article-of-association-is-legal-doc-of-company/
Registered Office Clause: It specifies the location where the company's registered office is situated. This office is where all official communications and notices are sent.
Objective Clause: This clause delineates the main objectives for which the company is formed. It's important to define these objectives clearly, as the company cannot undertake activities beyond those mentioned in this clause.
www.seribangash.com
Liability Clause: It outlines the extent of liability of the company's members. In the case of companies limited by shares, the liability of members is limited to the amount unpaid on their shares. For companies limited by guarantee, members' liability is limited to the amount they undertake to contribute if the company is wound up.
https://seribangash.com/promotors-is-person-conceived-formation-company/
Capital Clause: This clause specifies the authorized capital of the company, i.e., the maximum amount of share capital the company is authorized to issue. It also mentions the division of this capital into shares and their respective nominal value.
Association Clause: It simply states that the subscribers wish to form a company and agree to become members of it, in accordance with the terms of the MOA.
Importance of Memorandum of Association:
Legal Requirement: The MOA is a legal requirement for the formation of a company. It must be filed with the Registrar of Companies during the incorporation process.
Constitutional Document: It serves as the company's constitutional document, defining its scope, powers, and limitations.
Protection of Members: It protects the interests of the company's members by clearly defining the objectives and limiting their liability.
External Communication: It provides clarity to external parties, such as investors, creditors, and regulatory authorities, regarding the company's objectives and powers.
https://seribangash.com/difference-public-and-private-company-law/
Binding Authority: The company and its members are bound by the provisions of the MOA. Any action taken beyond its scope may be considered ultra vires (beyond the powers) of the company and therefore void.
Amendment of MOA:
While the MOA lays down the company's fundamental principles, it is not entirely immutable. It can be amended, but only under specific circumstances and in compliance with legal procedures. Amendments typically require shareholder
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Affordable Stationery Printing Services in Jaipur | Navpack n PrintNavpack & Print
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Personal Brand Statement:
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Putting the SPARK into Virtual Training.pptxCynthia Clay
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RMD24 | Debunking the non-endemic revenue myth Marvin Vacquier Droop | First ...BBPMedia1
Marvin neemt je in deze presentatie mee in de voordelen van non-endemic advertising op retail media netwerken. Hij brengt ook de uitdagingen in beeld die de markt op dit moment heeft op het gebied van retail media voor niet-leveranciers.
Retail media wordt gezien als het nieuwe advertising-medium en ook mediabureaus richten massaal retail media-afdelingen op. Merken die niet in de betreffende winkel liggen staan ook nog niet in de rij om op de retail media netwerken te adverteren. Marvin belicht de uitdagingen die er zijn om echt aansluiting te vinden op die markt van non-endemic advertising.
2. Learning Objectives
• Analyze the financial statements of healthcare organizations using
the horizontal analysis, vertical analysis and ratio analysis
• Calculate and interpret liquidity, profit, activity and capital structure
ratios
4. Standards for Comparison
When interpreting measures, we need to decide
whether the measures indicate good, bad, or
average performance. We can use the following to
make that judgment:
•Intra-company
•Competitor
•Industry
•Guidelines (rule of thumb)
C 2
13-4
5. Horizontal Analysis
Comparing a company’s financial condition and
performance across time.
Tools of AnalysisC 1
Comparing a company’s financial condition and
performance to a base amount.
Vertical Analysis
Measurement of key
relations between
financial statement items 13-5
6. Horizontal Analysis
• Looks at the percentage change in a line item from one year to the
next
• Goal – What is the percentage change in a line item from one year
to the next year ?
• An issue with horizontal analysis is that small percentage changes
can hide major dollar effects
• Another issue is that large percentage changes from year to year
may be relatively inconsequential in terms of dollar amounts
• 𝑯𝒐𝒓𝒊𝒛𝒐𝒏𝒕𝒂𝒍 𝑨𝒏𝒂𝒍𝒚𝒔𝒊𝒔 =
𝒔𝒖𝒃𝒔𝒆𝒒𝒖𝒆𝒏𝒕 𝒚𝒆𝒂𝒓−𝒑𝒓𝒆𝒗𝒊𝒐𝒖𝒔 𝒚𝒆𝒂𝒓
𝒑𝒓𝒆𝒗𝒊𝒐𝒖𝒔 𝒚𝒆𝒂𝒓
𝑿 𝟏𝟎𝟎
7. Comparative Statements
Calculate Change in Dollar Amount
Dollar
change
Analysis period
amount
Base period
amount= –
Since we are measuring the amount of
the change between 2011 and 2010, the
dollar amounts for 2010 become the
“base” period amounts.
P 1
Calculate Change as a Percent
Percent
change
Dollar change
Base period amount
100= ×
13-7
8. CLOVER CORPORATION
Comparative (partial) Balance Sheet
December 31, 2011
2011 2010
Dollar
Change
Percent
Change*
Assets
Current assets:
Cash and equivalents 12,000$ 23,500$ (11,500)$ (48.9)
Accounts receivable, net 60,000 40,000
Inventory 80,000 100,000
Prepaid expenses 3,000 1,200 1,800
Total current assets 155,000$ 164,700$
Property and equipment:
Land 40,000 40,000 - 0.0
Buildings and equipment, net 120,000 85,000
Total property and equipment 160,000$ 125,000$
Total assets 315,000$ 289,700$
* Percent rounded to first decimal point.
($11,500 ÷
$23,500) × 100 =
48.9%
$12,000 –
$23,500 =
$(11,500)
P 1
13-8
9. CLOVER CORPORATION
Comparative (Partial) Balance Sheet
December 31, 2011
2011 2010
Dollar
Change
Percent
Change*
Assets
Current assets:
Cash and equivalents 12,000$ 23,500$ (11,500)$ (48.9)
Accounts receivable, net 60,000 40,000 20,000 50.0
Inventory 80,000 100,000 (20,000) (20.0)
Prepaid expenses 3,000 1,200 1,800 150.0
Total current assets 155,000$ 164,700$ (9,700)$ (5.9)
Property and equipment:
Land 40,000 40,000 - 0.0
Buildings and equipment, net 120,000 85,000 35,000 41.2
Total property and equipment 160,000$ 125,000$ 35,000$ 28.0
Total assets 315,000$ 289,700$ 25,300$ 8.7
* Percent rounded to first decimal point.
P 1
13-9
10. 13-10
2011 2010
Dollars
Change
Percent
Change
Revenues $520,000 $480,000 $40,000 8.3%
Costs and expenses:
Cost of sales 360,000 315,000 45,000 14.3
Selling and admin. 128,600 126,000 2,600 2.1
Interest expense 6,400 7,000 (600) (8.6)
Income before taxes 25,000 32,000 (7,000) (21.9)
Income taxes (30%) 7,500 9,600 (2,100) (21.9)
Net income $17,500 $22,400 ($4,900) (21.9)
Net income per share $0.79 $1.01
Avg. # common shares 22,200 22,200
CLOVER CORPORATION
Comparative Income Statements
For the Years Ended December 31, 2011
Percent changes rounded to first decimal point.
P 1
12. Trend Analysis
• Trend analysis is used to reveal patterns in data covering successive
periods.
• It is a type of analysis that looks at changes in line items compared with
a base year.
Trend
percent
Any subsequent year – base year
Base year 100= ×
P 1
13-12
13. Trend Analysis
Berry Products
Income Information
For the Years Ended December 31,
Item 20X0 20X1 20X2 20X3 20X4
Operating Income 1,054,186$ 330,909$ 500,098$ 1,232,565$ 1,453,567$
Percentage
change from 20X0 -68.6% -52.6% 16.9% 37.9%
20X0 is the base period so its
amounts will equal 100%.
P 1
13-13
14. Trend Analysis
We can use the trend
percentages to construct a
graph so we can see the
trend over time.
P 1
13-14
15. Vertical (Common-Size) Analysis
• Purpose is to answer the general question, What percentage of one
line item is another line item?
• Vertical analysis is useful for analyzing the balance sheet
• Called common size because it converts every line item to a
percentage, thus allowing comparisons between the financial
accounts of the organizations of different sizes.
• Vertical analysis =
𝑳𝒊𝒏𝒆 𝒊𝒕𝒆𝒎 𝒐𝒇 𝒊𝒏𝒕𝒆𝒓𝒆𝒔𝒕
𝑩𝒂𝒔𝒆 𝒍𝒊𝒏𝒆 𝒊𝒕𝒆𝒎
𝐗𝟏𝟎𝟎
16. CLOVER CORPORATION
Comparative (Partial) Balance Sheet
December 31, 2011
Common-Size
Percents*
2011 2010 2011 2010
Assets
Current assets:
Cash and equivalents 12,000$ 23,500$ 3.8% 8.1%
Accounts receivable, net 60,000 40,000
Inventory 80,000 100,000
Prepaid expenses 3,000 1,200
Total current assets 155,000$ 164,700$
Property and equipment:
Land 40,000 40,000 12.7%
Buildings and equipment, net 120,000 85,000
Total property and equipment 160,000$ 125,000$
Total assets 315,000$ 289,700$
* Percent rounded to first decimal point.
($12,000 ÷
$315,000) ×
100 = 3.8%
($23,500 ÷
$289,700) ×
100 = 8.1%
P 2
13-16
17. CLOVER CORPORATION
Comparative (Partial) Balance Sheet
December 31, 2011
Common-Size
Percents*
2011 2010 2011 2010
Assets
Current assets:
Cash and equivalents 12,000$ 23,500$ 3.8% 8.1%
Accounts receivable, net 60,000 40,000 19.0% 13.8%
Inventory 80,000 100,000 25.4% 34.5%
Prepaid expenses 3,000 1,200 1.0% 0.4%
Total current assets 155,000$ 164,700$ 49.2% 56.9%
Property and equipment:
Land 40,000 40,000 12.7% 13.8%
Buildings and equipment, net 120,000 85,000 38.1% 29.3%
Total property and equipment 160,000$ 125,000$ 50.8% 43.1%
Total assets 315,000$ 289,700$ 100.0% 100.0%
* Percent rounded to first decimal point.
P 2
13-17
18. CLOVER CORPORATION
Comparative (Partial) Balance Sheets
December 31, 2011
Common-Size
Percents*
2011 2010 2011 2010
Liabilities and Shareholders' Equity
Current liabilities:
Accounts payable 67,000$ 44,000$ 21.3% 15.2%
Notes payable 3,000 6,000 1.0% 2.1%
Total current liabilities 70,000$ 50,000$ 22.2% 17.3%
Long-term liabilities:
Bonds payable, 8% 75,000 80,000 23.8% 27.6%
Total liabilities 145,000$ 130,000$ 46.0% 44.9%
Shareholders' equity:
Preferred stock 20,000 20,000 6.3% 6.9%
Common stock 60,000 60,000 19.0% 20.7%
Additional paid-in capital 10,000 10,000 3.2% 3.5%
Total paid-in capital 90,000$ 90,000$ 28.6% 31.1%
Retained earnings 80,000 69,700 25.4% 24.1%
Total shareholders' equity 170,000$ 159,700$ 54.0% 55.1%
Total liabilities and shareholders' equity 315,000$ 289,700$ 100.0% 100.0%
* Percent rounded to first decimal point.
P 2
13-18
19. CLOVER CORPORATION
Comparative Income Statements
For the Years Ended December 31, 2011
Common-Size
Percents*
2011 2010 2011 2010
Revenues 520,000$ 480,000$ 100.0% 100.0%
Costs and expenses:
Cost of sales 360,000 315,000 69.2% 65.6%
Selling and admin. 128,600 126,000 24.7% 26.3%
Interest expense 6,400 7,000 1.2% 1.5%
Income before taxes 25,000$ 32,000$ 4.8% 6.7%
Income taxes (30%) 7,500 9,600 1.4% 2.0%
Net income 17,500$ 22,400$ 3.4% 4.7%
Net income per share 0.79$ 1.01$
Avg. # common shares 22,200 22,200
* Rounded to first decimal point.
P 2
13-19
20. This is a graphical analysis of Clover
Corporation’s common-size income
statement for 2011.
Common-Size Graphics
Cost of Sales
69.2%
Selling and
Admin.
24.7%
Net Income
3.4%
Income Taxes
1.4%
Interest
Expense
1.2%
P 2
13-20
21. Let’s use the following financial
statements for Norton Corporation for
our ratio analysis.
Ratio Analysis
Liquidity
and
Efficiency
Solvency
Profitability Market
Prospects
P 3
13-21
22. Ratio Analysis
• Preferred approach for gaining an in depth understanding of
financial statements
• Ratio expresses the relationship between 2 numbers as a single
number. This provides an indication of the organization’s ability to
cover current obligations with current assets (ability to pay short
term debt
23. Categories of Ratios
• Liquidity-How well is the organization positioned to meet its short-
term obligations?
• Profitability-How profitable is the organization?
• Activity- How efficiently is the organization using its assets to
produce revenues?
• Capital structure- How are the organization’s assets financed and
ability to take on new debt?
24. A. Liquidity Ratios
• There are 6 liquidity ratios:
• Current Ratio-proportion of all current assets to all current liabilities
• Quick Ratio-used in industries in which net accounts receivable is
relatively liquid (not usually used in health care organizations)
• Acid Test Ratio-most stringent test of liquidity How much cash is
available to pay off all current liabilities?
• Days in Accounts Receivable ratio-How quickly a hospital is converting its
receivables into cash
• Days Cash on Hand ratio -number of days worth of expenses an
organization can cover with its most liquid assets
• Average Payment Period -How long on average it takes an organization to
pay its bills
27. Steps:
• 1. identify the dollar amount of current assets on the balance sheet.
• 2. identify the dollar amount of current liabilities on the balance sheet.
• 3. divide the current assets by current liabilities
• Example:
Year Current ratio = Current
assets
/ Current liabilities
20X1 1.80 = $ 2,514,335 / $ 1,395,190
20X0 0.58 = $ 1,954,134 / $ 3,394,418
Benchmark = 2.11
Desired position = Above
28. Quick
ratio
cash + marketable securities + Net accounts receivables
Current liabilities
=
Is commonly used in
industries in which net
accounts receivables is
relatively liquid.
2. Quick RatioP 3
13-28
29. Steps:
• 1. identify the dollar amount of cash, marketable securities, and net accounts receivables
on the balance sheet.
• 2. identify the dollar amount of current liabilities on the balance sheet.
• 3. divide the sum of cash, marketable securities and net accounts receivables by current
liabilities
• Example:
Year Quick
ratio
= (Cash & marketable
securities + net accounts
receivables )
/ Current liabilities
20X1 1.36 = ($ 363,181 + 1,541,244) / $ 1,395,190
20X0 0.46 = ($ 158,458 + 1,400,013) / $ 3,394,418
Benchmark = 1.52
Desired position = Above
30. This ratio provides the most
stringent test for liquidity.
It looks at how much cash is on hand
or readily available from marketable
securities to pay off all current
liabilities.
3. Acid-Test Ratio
Cash + Marketable securities
Current liabilities
=Acid-test
ratio
P 3
13-30
31. Steps:
• 1. identify the dollar amount of cash, marketable securities on the balance
sheet.
• 2. identify the dollar amount of current liabilities on the balance sheet.
• 3. divide the sum of cash, and temporary investments by current liabilities
• Example:
Year Acid-
test
ratio
= Cash & marketable
securities
/ Current liabilities
20X1 0.26 = $ 363,181 / $ 1,395,190
20X0 0.05 = $ 158,458 / $ 3,394,418
Benchmark = 0.30
Desired position = Above
32. • This ratio provides an estimate of
how many day’s revenues have not
yet been collected.
• Values above the benchmark
indicate problems relating to credit
collection policies.
• Values below the benchmark
indicate ability to collect
4.Days in Accounts Receivable
Net Patient Accounts receivables
Net Patient Revenues/365
Days in
Accounts
receivable
=
P 3
13-32
33. Steps:
• 1. identify the dollar amount of net patient revenues on the
statement of operations
• 2. divide net patient revenues by 365 to compute average net
patient revenues per day
• 3. identify the dollar amount of net patient accounts receivables on
the balance sheet
• 4. divide net patient accounts receivables by average net patient
revenues per day.
34. Example: benchmark = 49
desired position: below
Year Net
patient
revenues
/ 365
days
= Average net patient
revenues per day
20X1 $10,778,272 / 365 days = $ 29,530
20X0 $10,566,176 / 365 days = $ 28,948
Year Net patient
accounts
receivables
/ Average
net patient
revenues
per day
= Day’s in Accounts
Receivables
20X1 $1,541,244 / $ 29,530 = 52
20X0 $ 1,400,013 / $ 28,948 = 48
Steps 1 & 2:
Steps 3 & 4:
35. 5. Day’s Cash on Hand Ratio
Cash + Marketable Securities + Long Term
Investments
(Operating Expenses – Depreciation and
amortization)/365
Day’s Cash on
Hand
=
• This ratio provides an indication of
the no. of day’s worth of expenses
an organization can cover with its
most liquid assets: cash and
marketable securities.
36. Steps:
• 1. identify the dollar amount of operating expenses and
depreciation and amortization expenses on the statement of
operations.
• 2. divide operating expenses minus depreciation and amortization
expenses by 365 days to compute average cash operating expense
per day.
• 3. identify the dollar amount of cash, marketable securities and
long term investments on the balance sheet.
• 4. divide cash and marketable securities and long term investments
by the average cash operating expense per day
37. Example: benchmark = 86
Desired Position: above
Year (operating
expenses
- Depreciation
&
amortization
expenses )
/ 365
days
= Operating
expense per day
20X1 ($ 10,681,112 - $ 383,493) / 365 days = $ 28,213/ day
20X0 ($ 9,765,507 - $ 420,238) / 365 days = $ 25, 603 / day
Year Cash +
Marketable
Securities +
Long Term
Investments
/ Operating
expense per
day
= Day’s cash on hand
20X1 $ 3,777,913 / $ 28,213 = 134 days
20X0 $ 4,683, 934 / $ 25, 603 = 183 days
Steps 1 & 2:
Steps 3 & 4:
38. It is a measure of how long, on
average, it takes an organization
to pay its bills.
Current Liabilities
[(Operating Expenses –
Depreciation & Amortization) /
365]
Average
Payment Period
=
6. Average Payment Period RatioP 3
13-38
39. Steps:
• 1. identify the dollar amount of operating expenses and
depreciation and amortization expenses on the statement of
operations.
• 2. divide operating expenses minus depreciation and amortization
expenses by 365 days to compute average cash expense per day.
• 3. identify the dollar amount of current liabilities on the balance
sheet.
• 4. divide the current liabilities by the average cash expense per day
40. Example: benchmark = 50
desired position: organizationally dependent
Year (operating
expenses
- Depreciation
&
amortization
expenses )
/ 365
days
= Average cash
expense per day
20X1 ($ 10,681,112 - $ 383,493) / 365 days = $ 28,213/ day
20X0 ($ 9,765,507 - $ 420,238) / 365 days = $ 25, 603 / day
Year Current
Liabilities
/ Average
cash
expense per
day
= Average Payment
Period Days
20X1 $ 1,395,190 $ 28,213 = 49 days
20X0 $ 3,394,418 $ 25, 603 = 183 days
Steps 1 & 2:
Steps 3 & 4:
42. Operating revenue per adjusted discharge Ratio
Total operating Revenues
Adjusted Discharges
Operating
Revenue per
adjusted
discharge
=
measures total operating
revenues generated from the
patient care line of business
based on its adjusted inpatient
discharges
• Discharges are adjusted by
multiplying hospital total
discharges by a factor defined as
gross patient revenue divided by
gross impatient revenue
43. Steps:
• 1. identify operating revenue on the statement of operations.
• 2. identify adjusted discharges from utilization data.
• 3. divide operating revenue by adjusted discharges.
• Example:
Year Operating
revenue per
adjusted
discharge
= Total
operating
revenue
/ Adjusted discharges
20X1 $ 5,607 = $ 11,012,021 / 1,950
20X0 $ 6,011 = $ 10,819,693 / 1,800
Benchmark = $7,448
Desired position = Above
44. Operating Expenses per adjusted discharge Ratio
Total operating Expenses
Adjusted Discharges
Operating
Revenue per
adjusted
discharge
=
measures total operating expenses
incurred for providing its patient
care services based on its adjusted
inpatient discharges
• Discharges are adjusted by
multiplying hospital tota
discharges by a factor defined as
gross patient revenue divided by
gross impatient revenue
45. Steps:
• 1. identify operating expenses on the statement of operations.
• 2. identify adjusted discharges from utilization data.
• 3. divide operating expenses by adjusted discharges.
• Example:
Year Operating
expense per
adjusted
discharge
= Total
operating
revenue
/ Adjusted discharges
20X1 $ 5,477 = $ 10,681,112 / 1,950
20X0 $ 5,425 = $ 9,765,507 / 1,800
Benchmark = $7,197
Desired position = Below
46. Salary and Benefit Expense as a Percentage of
Total Operating Expense Ratio
Total Salary and Benefit
Expenses
Total Operating Expenses
Salary and
Benefit
Expense as a
Percentage of
Total Operating
Expense
=
measures the percentage of total
operating expenses that are
attributed to labor costs.
47. Steps:
• 1. identify the total salary and benefit expenses on the statement of operations.
• 2. identify the total operating expenses on the statement of operations.
• 3. divide the total salary and benefit expenses by the total operating expenses
• Example:
Year Salary and
benefit
expenses as a
percentage of
total operating
expense
= Salary and
benefit
expense
/ Total operating
expense
20X1 53% = $ 5,644,880 / $ 10, 681,112
20X0 55% = $ 5,345,498 / $ 9,765,507
Benchmark = 40%
Desired position = Below
48. Operating Margin Ratio
Operating income
Total Operating Revenues
Operating
Margin
=
measures profits earned from the
organization’s main line of business.
the margin indicates the proportion of profit
earned for each dollar of operating revenue-
that is, the proportion of profit remaining after
subtracting total operating expenses from
operating revenues. .
49. Steps:
• 1. identify the operating income on the statement of operations.
• 2. identify the total operating revenues on the statement of operations.
• 3. divide the operating income by total operating revenues
• Example:
Year Operating
Margin
= Operating
income
/ Total operating
revenues
20X1 0.03 = $ 330, 909 / $ 11,012,021
20X0 0.10 = $ 1,054,186 / $ 10,819,693
Benchmark = 0.03
Desired position = Above
50. Non-Operating Revenue Ratio
Non-Operating Revenues
Total Operating Revenues
Non-Operating
Revenue
=
this ratio is to find out how dependent th
organization is on patient-related ne
income.
the higher the ratio, the less the organization is
dependent on direct patient-related income and
the more it is dependent on revenues from
Non-Operating revenues may include: interest
income, dividends, gains from investment activities,
and assets released from restricted investment
accounts.
51. Steps:
• 1. identify the non-operating revenues on the statement of operations.
• 2. identify the total operating revenues on the statement of operations.
• 3. divide the non-operating revenues by the total operating revenues
• Example:
Year Non-Operating
Revenue Ratio
= Non-
Operating
Revenues
/ Total operating
revenues
20X1 0.02 = $ 185,000 / $ 11,012,021
20X0 0.02 = $ 165, 000 / $ 10,819,693
Benchmark = 0.04
Desired position = Organizationally Dependent
52. Return on Total Assets Ratio
Excess of revenues over
expenses
Total Assets
Return on total
assets
=
It measures how much profit is earned for
each dollar invested in assets.
53. Steps:
• 1. identify the excess of revenues over expenses on the statement of
operations.
• 2. identify the total assets on the balance sheet.
• 3. divide the excess of revenues over expenses by total assets.
• Example:
Year Return on
total assets
= Excess of
revenues
over
expenses
/ Total Assets
20X1 0.05 = $ 515,909 / $ 10,876,736
20X0 0.11 = $ 1,219,186 / $ 11,315,585
Benchmark = 0.04
Desired position = Above
54. Return on Net Assets Ratio
Excess of revenues over
expenses
Net Assets
Return on Net
assets
=
It measures the rate of return fpr each
dollar in net assets.
55. Steps:
• 1. identify the excess of revenues over expenses on the statement of
operations.
• 2. identify the net assets on the balance sheet.
• 3. divide the excess of revenues over expenses by net assets.
• Example:
Year Return on Net
assets
= Excess of
revenues
over
expenses
/ Net Assets
20X1 0.20 = $ 515,909 / $ 2,542,655
20X0 0.64 = $ 1,219,186 / $ 1,911,683
Benchmark = 0.08
Desired position = Above
56. C. Activity Ratios
• May be called Efficiency Ratios
• Ask the question “For each dollar invested in assets, how many dollars
of revenue are being generated”?
• The higher the ratio, the more efficiently the assets are being generated
• In general: activity ratios=
𝑹𝒆𝒗𝒆𝒏𝒖𝒆𝒔
𝑨𝒔𝒔𝒆𝒕𝒔
• Some selected activity ratios are:
1. Total Asset Turnover Ratio
2. Fixed Asset Turnover Ratio
3. Age of Plant Ratio
57. 1. Total Asset Turnover Ratio
Total Operating Revenues
Total Assets
Total Asset
Turnover ratio
=
It measures the overall efficiency of the
organization’s assets in producing
revenue.
58. Steps:
• 1. identify the total operating revenues on the statement of operations.
• 2. identify total assets on the balance sheet.
• 3. divide total operating revenues by total assets.
• Example:
Year Total asset
turnover
= Total
Operating
Revenues
/ Total Assets
20X1 1.01 = $ 11,012,021 / $ 10,876,736
20X0 0.96 = $ 10,819,693 / $ 11,315.585
Benchmark = 1.07
Desired position = Above
59. 2. Fixed Asset Turnover Ratio
Total Operating Revenues
Net Plant & Equipment
Fixed Asset
Turnover ratio
=
It aids in the evaluation of the most
productive assets, plant and equipment.
60. Steps:
• 1. identify the total operating revenues on the statement of operations.
• 2. identify net plant and equipment assets on the balance sheet.
• 3. divide total operating revenues by net plant and equipment (fixed assets).
• Example:
Year Fixed asset
turnover
= Total
Operating
Revenues
/ Net Plant and
Equipment
20X1 2.56 = $ 11,012,021 / $ 4,306,754
20X0 2.41 = $ 10,819,693 / $ 4,495,122
Benchmark = 2.12
Desired position = Above
61. 3. Age of Plant Ratio
Accumulated Depreciation
Depreciation Expense
Age of Plant
ratio
=
This ratio provides an indication of the
average age of a hospital’s plant and
equipment.
62. Steps:
• 1. identify the accumulated depreciation on the balance sheet.
• 2. identify depreciation expense on the statement of operations.
• 3. divide the accumulated depreciation by the depreciation expense.
• Example:
Year Age of Plant = Accumulated
Depreciation
/ Depreciation
Expense
20X1 7.25 = $ 2,781,741 / $ 383,493
20X0 5.71 = $ 2,398,248 / $ 420,238
Benchmark = 10.31
Desired position = below
63. D. Capital Structure Ratios
• Define 2 areas
How are an organization’s assets financed?
How able is this organization to take on new debt?
• Greater understanding of these ratios can be gained by examining
the statement of cash flows to determine if significant long term
debt has been acquired or paid off
• OR
• if there has been a sale or purchase of fixed assets
64. Capital Structure Ratios
Continued…
There are 4 to be discussed
1. Long term debt to net assets-measures the proportion of debt to net
assets
2. Net assets to total assets-reflects the proportion of total assets
financed by equity
3. Times Interest Earned- enables creditors and lenders to evaluate a
hospitals ability to generate the earnings necessary to meet interest
expense requirements
4. Debt service Coverage- measures the ability to repay a loan
65. 1. Long-term debt to net assets
Ratio
Long-term Debt
Net assets
Long-term debt
to net assets
ratio
=
This ratio measures the proportion of debt to
net assets.
66. Steps:
• 1. identify the non-current debt on the balance sheet.
• 2. identify net assets on the balance sheet.
• 3. divide non-current debt by net assets.
• Example:
Year Long-term
debt to net
assets
= Total
Operating
Revenues
/ Net Plant and
Equipment
20X1 2.73 = $ 6,938,891 / $ 2,542,655
20X0 3.14 = $ 6,009,484 / $ 1,911,683
Benchmark = 0.21
Desired position = below
67. 2. Net Assets to Total assets Ratio
Net assets
Total assets
Net assets to
total assets
ratio
=
Creditors desire a strong equity position with
sufficient funds to pay off debt obligations.
So a high net asset or equity position is
enhanced either through the retention of
earnings or through private contributions
from the community.
68. Steps:
• 1. identify net assets on the balance sheet.
• 2. identify total assets on the balance sheet.
• 3. divide net assets by total assets.
• Example:
Year Net assets to
total assets
ratio
= Net assets / Total assets
20X1 0.23 = $ 2,542,655 / $ 10,876,736
20X0 0.17 = $ 1,911,683 / $ 11,315,585
Benchmark = 0.54
Desired position = Above
69. 3. Times interest earned Ratio
(excess of revenues over
expenses+ interest expense)
Interest expense
Times interest
earned ratio =
This ratio enables creditors and lenders to
evaluate a hospital’s ability to generate the
earnings necessary to meet interest
expense requirements.
70. Steps:
• 1. identify net assets on the balance sheet.
• 2. identify total assets on the balance sheet.
• 3. divide net assets by total assets.
• Example:
Year Times interest
earned ratio
= (Excess of revenues over
expenses + interest expense)
/ Interest
expense
20X1 2.03 = ($ 515,909 + $ 500,000) / $ 500,000
20X0 5.41 = ($ 1,219,186 + $ 276,379) / $ 276,379
Benchmark = 3.78
Desired position = Above
71. 4. Debt Service Coverage Ratio
(excess of revenues over
expenses + interest expense +
Depreciation and Amortization
Expenses) )
(Interest expense + Principal
Payments)
Debt Service
Coverage ratio =
This ratio enables the ability to repay a loan.
72. Steps:
1. identify excess of revenues over expenses on the statement of
operations.
2. identify interest expense on the statement of operations.
3. Identify principal payments on the statement of cash flows
4. Add the excess of revenues over expenses, interest expense and
depreciation and amortization expense from the statement of
operations.
5. divide the sum from step 4 by the sum of the interest expense
and principal payments.
74. Summary
• Three ways have been presented to analyze financial statements
• Horizontal analysis which examines year to year changes in line items of
financial statements
• Vertical analysis which compares one line item with another line item
for the same time period
• Ratio analysis which examines the ratio of one line item to another
• Ratio analysis is the preferred approach for detailed analysis of financial
statements of healthcare organizations