HMGT 3310 Finance Final Exam With Complete
Solutions 100% Verified
Horizontal analysis % change solution [(current year - past year) / past year] x 100
compares financial information over several time periods in order to show growth rates
and trends over that span of time.
CAGR solution [(Ending Value / Beginning Value) ^ (1 / # of years)] - 1
average growth rate for period of time
Trend analysis solution ((CY or any year after that-base year)/base year) X 100
base year= past year
-Compared changes over a period of time by comparing each year w base year
Vertical analysis % - Answer (specific item value/base value) x 100
-proportion of the base within the same period
(IS: item is expressed as % of total rev; BS: item is % of total assets)
-expense and resource allocation, profitability analysis
-allows comparing organizations of different sizes
-higher % in LT debt than total net assets, there is more risk
Liquidity ratios - Answer How well is org positioned to meet ST liabilities
-use BS
-current; quick; acid test; days in a/r; days cash on hand; ave pmt period
Current ratio - Answer CA/CL
,-how org uses CA to pay off CL; >1 desired
-how well org is positioned to meet current obligations w current resources
Quick ratio - Answer (Cash+ marketable securities (ST investments)+ net recievables)/
CL
-NR is $ collected from pts
-more liquid (stringient) than current ratio
-Net a/r is relatively liquid
-desired: above
->1 indicates that the organization can meet its short-term liabilities without financial
strain.
Acid test - Answer (Cash + marketable securities)/ CL
-MS: ST investment
-most stringent test of liquidity; most liquid
-how much cash is available to pay off current obligations
-desired: above
Days in A/R - Answer (Net pt A/R) / (net pt rev/365)
Aka net a/r / ave daily pt rev
-how fast a hospital turns its receivables into cash
-how many days of revenue is tied up and uncollected
-prefer: lower; want number low
Days cash on hand - Solution (Cash+mkt sec+LT investments) / ((Op. exp- dep and amort
exp)/365)
-Number of day's worth of expense and organization has, as its most liquid assets, to
cover its
-preferred: greater than
, -present: days
Ave. Payment period - Solution CL/ ((op exp- dep&amort exp)/365)
-how long on average it takes for an org to pay bills (vendors)
-opposite of days in A/R
-if days in A/R are high, they wont pay vendors as quick
Revenue, expense, and profitability ratios - Answer How profitable is an organization?
How effective is it in controlling its operating costs and increasing its operating
revenues?
-op rev per adjusted discharge; op exp per adjusted discharge; salary and benefit exp %
of op exp; op margin; non op rev; return on total assets; return on net assets
Operating revenue per adjusted discharge - Answer total operating revenue / adjusted
discharge
-ave amt of revenue made per pt based on adjusted discharges
-desired: above
-adj dis= (total gross pt rev/total gross inpt rev)x discharges
Operating expense per adjusted discharge - Answer Total Operating Expense / Adjusted
Discharge
-desired: below
-$ amt
adjusted discharge - Answer adj dis= (total gross pt rev/total gross inpt rev)x discharges
Salary and benefit expense as % of operating expense - Answer Salary & Benefits / Total
Operating Expense
-desired: below
Solutions 100% Verified
Horizontal analysis % change solution [(current year - past year) / past year] x 100
compares financial information over several time periods in order to show growth rates
and trends over that span of time.
CAGR solution [(Ending Value / Beginning Value) ^ (1 / # of years)] - 1
average growth rate for period of time
Trend analysis solution ((CY or any year after that-base year)/base year) X 100
base year= past year
-Compared changes over a period of time by comparing each year w base year
Vertical analysis % - Answer (specific item value/base value) x 100
-proportion of the base within the same period
(IS: item is expressed as % of total rev; BS: item is % of total assets)
-expense and resource allocation, profitability analysis
-allows comparing organizations of different sizes
-higher % in LT debt than total net assets, there is more risk
Liquidity ratios - Answer How well is org positioned to meet ST liabilities
-use BS
-current; quick; acid test; days in a/r; days cash on hand; ave pmt period
Current ratio - Answer CA/CL
,-how org uses CA to pay off CL; >1 desired
-how well org is positioned to meet current obligations w current resources
Quick ratio - Answer (Cash+ marketable securities (ST investments)+ net recievables)/
CL
-NR is $ collected from pts
-more liquid (stringient) than current ratio
-Net a/r is relatively liquid
-desired: above
->1 indicates that the organization can meet its short-term liabilities without financial
strain.
Acid test - Answer (Cash + marketable securities)/ CL
-MS: ST investment
-most stringent test of liquidity; most liquid
-how much cash is available to pay off current obligations
-desired: above
Days in A/R - Answer (Net pt A/R) / (net pt rev/365)
Aka net a/r / ave daily pt rev
-how fast a hospital turns its receivables into cash
-how many days of revenue is tied up and uncollected
-prefer: lower; want number low
Days cash on hand - Solution (Cash+mkt sec+LT investments) / ((Op. exp- dep and amort
exp)/365)
-Number of day's worth of expense and organization has, as its most liquid assets, to
cover its
-preferred: greater than
, -present: days
Ave. Payment period - Solution CL/ ((op exp- dep&amort exp)/365)
-how long on average it takes for an org to pay bills (vendors)
-opposite of days in A/R
-if days in A/R are high, they wont pay vendors as quick
Revenue, expense, and profitability ratios - Answer How profitable is an organization?
How effective is it in controlling its operating costs and increasing its operating
revenues?
-op rev per adjusted discharge; op exp per adjusted discharge; salary and benefit exp %
of op exp; op margin; non op rev; return on total assets; return on net assets
Operating revenue per adjusted discharge - Answer total operating revenue / adjusted
discharge
-ave amt of revenue made per pt based on adjusted discharges
-desired: above
-adj dis= (total gross pt rev/total gross inpt rev)x discharges
Operating expense per adjusted discharge - Answer Total Operating Expense / Adjusted
Discharge
-desired: below
-$ amt
adjusted discharge - Answer adj dis= (total gross pt rev/total gross inpt rev)x discharges
Salary and benefit expense as % of operating expense - Answer Salary & Benefits / Total
Operating Expense
-desired: below
