Analyze Organizational Financial Data
Question # 00769523
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Updated on: 07/08/2020 02:14 PM Due on: 07/08/2020
Analyze Organizational Financial Data
You are an administrator at Arizona Health Services (AHS), a large hospital system. You have been asked to assist in evaluating the financial feasibility of purchasing Jiranna Healthcare, a managed care organization in the San Jose area. For this part of the Performance Task, you will conduct a 5-year analysis of Jiranna Healthcare’s operational and financial data in order to determine whether or not it is an attractive acquisition. Refer to “Jiranna Finances” for financial statements to analyze.
Prepare a 2- to 3-page financial analysis. The focus must be on the content and the depth of your analysis. Unless otherwise indicated, a 5-year trend analysis—including the most recent year of available data—is expected.
Complete your analysis as follows:
- Calculate the 5-year net sales, operating expenses, operating income, and net income of Jiranna Healthcare. Once calculations are complete, interpret the resulting data and explain the significance of the trend results.
- Calculate the 5-year total profit margin, asset turnover, return on assets, and return on net worth. Once calculations are complete, interpret the resulting data and determine the company’s profitability.
- Calculate the 5-year current ratio, day’s cash on hand, and working capital. Once calculations are complete, interpret the resulting data and assess the company’s liquidity.
- Calculate the 5-year debt ratio and times interest earned ratio. Once calculations are complete, interpret the resulting data and explain the company’s long term solvency.
- Complete a DuPont analysis for each of the five most recent years. Once calculations are complete, interpret the resulting data and determine the company’s individual DuPont characteristics (e.g., total margin, total asset turnover & equity multiplier) and trends across the analysis period.
- Ultimately a decision has to be made. Would you recommend purchasing Jiranna Healthcare? Why?
Balance Sheet
| Jiranna Healthcare Balance Sheet December 31, 2013 (in thousands) | |||||
| 2009 | 2010 | 2011 | 2012 | 2013 | |
| Current assets | $ 280 | $ 124 | $ 136 | $ 295 | $ 355 |
| Cash | 30 | 45 | 50 | 75 | 88 |
| Receivables, net | 1,340 | 1,536 | 1,700 | 1,896 | 2,400 |
| Inventory | 140 | 175 | 250 | 276 | 266 |
| Prepaid expenses | 40 | 32 | 40 | 53 | 78 |
| Total Current Assets | 1,830 | 1,912 | 2,176 | 2,595 | 3,187 |
| Long-term investments | 600 | 1,010 | 1,200 | 1,300 | 1,510 |
| Plant and equipment | 6,580 | 6,780 | 6,900 | 7,200 | 7,500 |
| Less accumulated depreciation | -1,660 | -1750 | -1,800 | -1,950 | -2,350 |
| Plants and equipment, net | 4,920 | 5,030 | 5,100 | 5,250 | 5,150 |
| Total Assets | $ 7,350 | $ 7,952 | $ 8,476 | $ 9,145 | $ 9,847 |
| Current liabilities | |||||
| Accounts payable | 370 | 302 | 356 | 370 | 375 |
| Accrued expenses payable | 220 | 208 | 212 | 210 | 215 |
| Deferred revenues | 60 | 77 | 87 | 87 | 94 |
| Total current liabilities | 650 | 587 | 655 | 667 | 684 |
| Long-term liabilities | 2,400 | 3,000 | 3,300 | 3,500 | 3,750 |
| Total Liabilities | 3,050 | 3,587 | 3,955 | 4,167 | 4,434 |
| Net assets | |||||
| Unrestricted | 3,000 | 3,285 | 3,221 | 3,678 | 4,113 |
| Temporarily restricted | 700 | 700 | 700 | 700 | 700 |
| Permanently restricted | 600 | 600 | 600 | 600 | 600 |
| Total Net Assets | 4,300 | 4,585 | 4,521 | 4,978 | 5,413 |
| Total Liabilities and Net Assets | 7,350 | 8,172 | 8,476 | 9,145 | 9,847 |
Income Statement
| Jiranna Healthcare Income Statement December 31, 2013 (in thousands) | |||||
| 2009 | 2010 | 2011 | 2012 | 2013 | |
| Gross patient services revenues (non-GAAP) | 8,870 | 9,490 | 10,400 | 11,200 | 12,050 |
| Less deductions from revenues (non-GAAP) | (780) | (890) | (1,000) | (1,500) | (1,600) |
| Net patient service revenues | 8,090 | 8,600 | 9,400 | 9,700 | 10,450 |
| Other operating revenues | 519 | 633 | 679 | 717 | 980 |
| Total operating revenues | 8,609 | 9,233 | 10,079 | 10,417 | 11,430 |
| Operating expenses | |||||
| Salaries and wages | 5,497 | 5,678 | 5,890 | 6,170 | 6,800 |
| Supplies | 823 | 850 | 855 | 890 | 905 |
| Utilities | 558 | 576 | 590 | 595 | 620 |
| Insurance | 44 | 46 | 49 | 54 | 70 |
| Depreciation | 168 | 173 | 175 | 178 | 188 |
| Interest | 142 | 146 | 154 | 179 | 198 |
| Bad debts | 363 | 375 | 400 | 455 | 500 |
| Other operating expenses | 987 | 1,299 | 1,560 | 1,300 | 1,350 |
| Total operating expenses | 8,582 | 9,143 | 9,673 | 9,821 | 10,631 |
| Operating income | 27 | 90 | 406 | 596 | 799 |
| Nonoperating income | 154 | 195 | 245 | 220 | 290 |
| Excess of revenue over expenses | $ 181 | $ 285 | $ 651 | $ 816 | $ 1,089 |
| Change in net assets | |||||
| Unrestricted | $ 181 | $ 285 | $ 651 | $ 816 | $ 1,089 |
| Temporarily restricted | - | - | - | - | - |
| Permanently restricted | - | - | - | - | - |
| Total change in net assets | 181 | 285 | 651 | 816 | 1,089 |
Cash Flows
| Jiranna Healthcare Cash Flows, 2013 (in thousands) | |
| Cash Flows from Operating Activities | |
| Cash received from patient and third-party payers | $ 10,671 |
| Cash received from operating revenue sources | 800 |
| Cash received from nonoperating revenue sources | 270 |
| Cash payments to employees | (5,600) |
| Cash payments to suppliers of goods and services | (4,800) |
| Net cash flow from operating activities | $ 1,341 |
| Cash flows from Investing Activities | |
| Cash payments for purchase of plant assets | (1,200) |
| Cash payments for purchase of long-term investments | (670) |
| Proceeds from sales of plant assets | 80 |
| Proceeds from sale of long-term investments | 60 |
| Net cash flow from investing activities | (1,730) |
| Cash flows from Financing Activities | |
| Proceeds from issuance of 6% bonds payable | 4,000 |
| Principal payments on long-term debt | (300) |
| Cash payments to retire 7% bonds payable | (3,200) |
| Net cash flow from financing activities | 500 |
| Net increase/(decrease) in cash | $ 111 |
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Rating:
/5
Solution: Analyze Organizational Financial Data