Page 1 of 7
HCA 312 - WEEK 4 ASSIGNMENT
ENTER YOUR NAME IN THE BOX ABOVE
FINANCIAL AND OPERATING RATIOS
INSTRUCTIONS: Review Chapters 11, 12, & 13 before completing the template. You will be utilizing Dr. Smith and Dr. Brown’s Physician
Practice financial statements for completing the financial ratio calculations. In addition, you will utilize the Ratio Benchmark & Median
Table below as well as the textbook appendices 13A, and 13C to complete the operating ratio calculations. Refer to the Week 4 Assignment
directions within the course to understand what is expected in each part of the table below. Thorough explanations and definitions for each section
are required. If you include enough detail for each section, the template document will be at least seven pages in length. Include APA citations
within the Response Column where appropriate. List your references in APA format on the last row of this template. All citations and references
must be in APA style according to the Ashford Writing Center guidelines. Once you complete the template, upload the document to the Week 4
Assignment section of the course.
Use the Ratio Benchmark and Median Table below in Part 3 for your analysis on Dr. Smith and Dr. Brown’s financial health status.
RATIO BENCHMARK AND MEDIAN TABLE
Ratio
Benchmark - 50th Percentile) for Comparable
Median for Comparable Physician Group Practices
Physician Group Practices
Current Ratio
*2.2
2
Quick Ratio
*1.74
1
Debt Service Coverage Ratio
*1.49
1.1
Operating Margin
*4.45
2.6
Return on Total Assets
*4.04%
4.05%
*Benchmark Data: 50th Percentile Information extrapolated from Appendix 33B Case Study.
HCA312 6/12/2018
Page 2 of 7
PART 1:
CALCULATION of FINANCIAL RATIOS:
Below are five financial ratios. In each of the columns, you will be responsible for showing the calculation for each based off Dr. Smith and Brown’s
financial statements (located with the textbook). You will need to identify the type of ratio as well. Choices for the type of ratio are:
LIQUIDITY, SOLVENCY, PROFITABILITY or N/A.
EXAMPLE for the INVENTORY TURNOVER RATIO:
Show Calculation: 180,000/5000 = 36
Identify the type of ratio: n/a
CURRENT RATIO
QUICK RATIO
DEBT SERVICE
OPERATING MARGIN
RETURN ON TOTAL
ASSETS
COVERAGE RATIO
Show calculation in the box
Show calculation in the
Show calculation: (For this
Show calculation in the box
Show calculation in the box
provided:
box provided:
ratio, the denominator you
provided:
provided:
Identify the type of ratio:
Identify the type of ratio:
will use is 22,200)
Identify the type of ratio:
Identify the type of ratio:
Identify the type of ratio:
HCA312 6/12/2018
Page 3 of 7
PART 2:
TYPE OF RATIOS
In your own words, define the meaning of each ratio: liquidity, solvency, and profitability.
Liquidity
Solvency
Profitability
PART 3:
OPERATING RATIOS
Define the financial ratios listed below. Next, analyze the result for each ratio calculated above and explain what the calculated result tells you
about the financial health of Dr. Smith and Dr. Brown’s physician practice
DEFINE: Inventory turnover is calculated to determine how quickly the inventory is used based on the services
EXAMPLE:
rendered. If the inventory turnover is high, this means the hospital does not have enough inventories on hand to
accommodate the patient load. ANALYSIS: For this example, the hospital is turning over their inventory 36 times per
INVENTORY
TURNOVER RATIO
year, which is about 3 times a month. The opposite is true if the inventory turnover calculation is lower than the
median. FINANCIAL HEALTH: This could mean that there is a build-up of inventory due to lower than expected
patient revenues.
HCA312 6/12/2018
Page 4 of 7
1) CURRENT RATIO
2) QUICK RATIO
3) DEBT SERVICE
COVERAGE RATIO
4) OPERATING MARGIN
5) RETURN ON TOTAL
ASSETS
PART 4:
CAPITAL BUDGET EXPENDITURES - TIME VALUE OF MONEY CALCULATIONS
Complete the tables below by computing the following time value of money calculations: Present Value, Internal Rate of Return, and Pay Back
Period for the capital expenditures for Dr. Smith and Brown’s physician practice. Enter the result of the calculation into the blank cells.
HCA312 6/12/2018
Page 5 of 7
PRESENT VALUE
CE/Amount
Compounding Period
Rate of Interest
Laboratory:
$70,000
Annual
4% for 15 years
EMR Software:
$125,000
Annual
6% for 10 years
Present Value
INTERNAL RATE OF RETURN
Initial cost of Investment
Periods of Useful life
Estimated annual net cash
Look-up table value
Rate of Interest
inflow generated
e-prescribing software:
10
$10,190
6
$14,108
$ 75,000
Lab equipment: $ 58,000
PAY BACK PERIOD
(assume no taxes are being paid)
Equipment Purchase Price
EMR System: $350,000
Period of Useful
Increased Annual
Operating Costs
Depreciation Expense
Life
Revenue Generated
Associated with
per Year
per Year
Revenue
10 years
$100,000
$32,000
Pay Back Period
$45,000
HCA312 6/12/2018
Page 6 of 7
Integrated Billing System:
10 years
$95,000
$27,000
$36,000
$300,000
PART 5:
EVALUATION OF CAPITAL BUDGET EXPENDITURES
As a Health Care Manager, you will be responsible for operational decisions by applying financial management principals. For Part 5, you will apply
the concepts of the Time Value of Money to define, analyze, and rationalize your findings from the Financial and Operation ratio results to make
informed decisions regarding capital expenditures for Dr. Smith and Brown’s physician practice. Include any government or regulatory mandate
information that you considered when making your decision. Complete each of the cells below.
Define the time value of
money.
Provide a real-world
example for the time value
of money.
Why is time such an
important factor when
considering a capital
expenditure?
After review of the financial
statements and ratios,
analyze the feasibility that
the Capital Expenditure
listed above would benefit
HCA312 6/12/2018
Page 7 of 7
Dr. Smith and Dr. Brown’s
practice. Explain your
rationale on whether you
would recommend the
purchase of the capital
expenditures identified.
Include any positive or
negative aspects of
regulatory or government
mandates that were
considered in making the
decision to purchase the
capital expenditures.
REFERENCES
List the references you
used to complete this
assignment.
You must format the
references in APA format
as outlined in 6th edition
guidelines found at the AU
Writing Center.
HCA312 6/12/2018
Page 1 of 7
HCA 312 - WEEK 4 ASSIGNMENT
ENTER YOUR NAME IN THE BOX ABOVE
FINANCIAL AND OPERATING RATIOS
INSTRUCTIONS: Review Chapters 11, 12, & 13 before completing the template. You will be utilizing Dr. Smith and Dr. Brown’s Physician
Practice financial statements for completing the financial ratio calculations. In addition, you will utilize the Ratio Benchmark & Median
Table below as well as the textbook appendices 13A, and 13C to complete the operating ratio calculations. Refer to the Week 4 Assignment
directions within the course to understand what is expected in each part of the table below. Thorough explanations and definitions for each section
are required. If you include enough detail for each section, the template document will be at least seven pages in length. Include APA citations
within the Response Column where appropriate. List your references in APA format on the last row of this template. All citations and references
must be in APA style according to the Ashford Writing Center guidelines. Once you complete the template, upload the document to the Week 4
Assignment section of the course.
Use the Ratio Benchmark and Median Table below in Part 3 for your analysis on Dr. Smith and Dr. Brown’s financial health status.
RATIO BENCHMARK AND MEDIAN TABLE
Ratio
Benchmark - 50th Percentile) for Comparable
Median for Comparable Physician Group Practices
Physician Group Practices
Current Ratio
*2.2
2
Quick Ratio
*1.74
1
Debt Service Coverage Ratio
*1.49
1.1
Operating Margin
*4.45
2.6
Return on Total Assets
*4.04%
4.05%
*Benchmark Data: 50th Percentile Information extrapolated from Appendix 33B Case Study.
HCA312 6/12/2018
Page 2 of 7
PART 1:
CALCULATION of FINANCIAL RATIOS:
Below are five financial ratios. In each of the columns, you will be responsible for showing the calculation for each based off Dr. Smith and Brown’s
financial statements (located with the textbook). You will need to identify the type of ratio as well. Choices for the type of ratio are:
LIQUIDITY, SOLVENCY, PROFITABILITY or N/A.
EXAMPLE for the INVENTORY TURNOVER RATIO:
Show Calculation: 180,000/5000 = 36
Identify the type of ratio: n/a
CURRENT RATIO
QUICK RATIO
DEBT SERVICE
OPERATING MARGIN
RETURN ON TOTAL
ASSETS
COVERAGE RATIO
Show calculation in the box
Show calculation in the
Show calculation: (For this
Show calculation in the box
Show calculation in the box
provided:
box provided:
ratio, the denominator you
provided:
provided:
Identify the type of ratio:
Identify the type of ratio:
will use is 22,200)
Identify the type of ratio:
Identify the type of ratio:
Identify the type of ratio:
HCA312 6/12/2018
Page 3 of 7
PART 2:
TYPE OF RATIOS
In your own words, define the meaning of each ratio: liquidity, solvency, and profitability.
Liquidity
Solvency
Profitability
PART 3:
OPERATING RATIOS
Define the financial ratios listed below. Next, analyze the result for each ratio calculated above and explain what the calculated result tells you
about the financial health of Dr. Smith and Dr. Brown’s physician practice
DEFINE: Inventory turnover is calculated to determine how quickly the inventory is used based on the services
EXAMPLE:
rendered. If the inventory turnover is high, this means the hospital does not have enough inventories on hand to
accommodate the patient load. ANALYSIS: For this example, the hospital is turning over their inventory 36 times per
INVENTORY
TURNOVER RATIO
year, which is about 3 times a month. The opposite is true if the inventory turnover calculation is lower than the
median. FINANCIAL HEALTH: This could mean that there is a build-up of inventory due to lower than expected
patient revenues.
HCA312 6/12/2018
Page 4 of 7
1) CURRENT RATIO
2) QUICK RATIO
3) DEBT SERVICE
COVERAGE RATIO
4) OPERATING MARGIN
5) RETURN ON TOTAL
ASSETS
PART 4:
CAPITAL BUDGET EXPENDITURES - TIME VALUE OF MONEY CALCULATIONS
Complete the tables below by computing the following time value of money calculations: Present Value, Internal Rate of Return, and Pay Back
Period for the capital expenditures for Dr. Smith and Brown’s physician practice. Enter the result of the calculation into the blank cells.
HCA312 6/12/2018
Page 5 of 7
PRESENT VALUE
CE/Amount
Compounding Period
Rate of Interest
Laboratory:
$70,000
Annual
4% for 15 years
EMR Software:
$125,000
Annual
6% for 10 years
Present Value
INTERNAL RATE OF RETURN
Initial cost of Investment
Periods of Useful life
Estimated annual net cash
Look-up table value
Rate of Interest
inflow generated
e-prescribing software:
10
$10,190
6
$14,108
$ 75,000
Lab equipment: $ 58,000
PAY BACK PERIOD
(assume no taxes are being paid)
Equipment Purchase Price
EMR System: $350,000
Period of Useful
Increased Annual
Operating Costs
Depreciation Expense
Life
Revenue Generated
Associated with
per Year
per Year
Revenue
10 years
$100,000
$32,000
Pay Back Period
$45,000
HCA312 6/12/2018
Page 6 of 7
Integrated Billing System:
10 years
$95,000
$27,000
$36,000
$300,000
PART 5:
EVALUATION OF CAPITAL BUDGET EXPENDITURES
As a Health Care Manager, you will be responsible for operational decisions by applying financial management principals. For Part 5, you will apply
the concepts of the Time Value of Money to define, analyze, and rationalize your findings from the Financial and Operation ratio results to make
informed decisions regarding capital expenditures for Dr. Smith and Brown’s physician practice. Include any government or regulatory mandate
information that you considered when making your decision. Complete each of the cells below.
Define the time value of
money.
Provide a real-world
example for the time value
of money.
Why is time such an
important factor when
considering a capital
expenditure?
After review of the financial
statements and ratios,
analyze the feasibility that
the Capital Expenditure
listed above would benefit
HCA312 6/12/2018
Page 7 of 7
Dr. Smith and Dr. Brown’s
practice. Explain your
rationale on whether you
would recommend the
purchase of the capital
expenditures identified.
Include any positive or
negative aspects of
regulatory or government
mandates that were
considered in making the
decision to purchase the
capital expenditures.
REFERENCES
List the references you
used to complete this
assignment.
You must format the
references in APA format
as outlined in 6th edition
guidelines found at the AU
Writing Center.
HCA312 6/12/2018
Purchase answer to see full
attachment