Patton-Fuller Ratio Computation Argumentative

This paper will address the ratio computations to Patton-Fuller Community Hospital taken from Audited and Unaudited Reports from 2008-2009. From 2008-2009 the existing assets reduced, but showed a growth in the hospital’s responsibilities. The hospital is presently making adequate revenue to cover the debts, which equals to no profit. Revenue needs to rise to avoid the debts of the hospital from increasing. Providing excellence service will in turn increase the quantity of patients seen eventually increasing revenue.  The Current Ratio decrease, due to assests, and an increase in liabilities, which indicates a 2.23% change in the ratio of assets to liabilities. The sharp drop in cash was offset by large rises in Net Accounts Receivable and Inventory, which are ordinarily unfavorable events also. However, if significant supplies were purchased (due to vendor discounts), the increase in Inventory could have been an astute business decision. The uncollected Accounts Receivables are troublesome. 1.The Quick Ratio decrease.

The main difference between the Current Ratio and the Quick Ratio is 6.05:1 “inventory” in the Quick Ratio. 1.The Days Cash on Hand decrease, due to cash equivalents. Again, the CEO explained the use of cash to buy equipment and inventory. However, the CEO did not explain how the unfavorable increase in Accounts Receivable also absorbed millions of cash. 1.The Days Receivables increase, effectively removing about $22,121 in cash from the facility and leaving that cash in the hands of the payers. 1.The Debt Service Coverage Ratio is decrease due to the increase in cash and the increase in “Maximum Annual Debt Service”. Because the hospital has decrease expenses 1.The change in the Liabilities to Equity Ratio (ratio of what is “owed” to what is “owned” was unfavorable, due to higher liabilities and lower Retained Earnings (or “Net Worth”). 1.The Operating Margin increase , from a -200 % to a 900 % gain. 1.Return on Total Assets increase did what?, due to the improvement in Operating Income and the relatively small increase in Total Assets.

Based on the audited financial statements, the eight ratios show that: 1.The Current Ratio decrease “unaudited” statements, due to the decrease in current assets as well as an increase in liabilities, which indicates an increase change in the ratio of assets to liabilities. 1.The Quick Ratio decrease, due to an audit adjustment to Net Accounts Receivable. This ratio indicates a decrease in the ratio of assets to liabilities. 1.The Days Cash on Hand increase “unaudited” statements, due to expenditure of cash and the increase Accounts Receivable.

1.The Days Receivables increase, again effectively removing millions in cash from the facility and leaving it in the hands of the payers. Due to the accounting method used at the hospital (Provision for Doubtful Accounts is shown as an “expense” and does not directly reduce “Net Patient Revenue”), the effect of the $4,224 audit adjustment was not as apparent in this ratio. 1.The Debt Service Coverage Ratio decrease unaudited statement, due to the audit adjustment of $1,000 Again, the “non-cash” expenses (depreciation, amortization) are big factors in the computation of this ratio. 1.The Liabilities to Equity Ratio (ratio of what is “owed” to what is “owned” showed the same unfavorable change, due 1.The Operating Margin showed decrease loss or gain ? (due to the audit adjustment), which is different from that reported on the “unaudited” financial statements. Still, the total operating revenue “breakeven”.

1.Return on Total Assets increase “breakeven”, due to increase Operating income (again, not as much as was indicated via the unaudited financial statements).

References

University of Phoenix. (2009,2008). Patton-Fuller Community Hospital [Multimedia]. Retrieved from University of Phoenix, HCS/405 website.