Financial Ratio Assignment

Answer all questions below. The statements start at row 18 and the questions start at row 80. A Detroit Free Press Story that inspired the questions is in row 16.
For each question, there are three required parts:
(1) calculate the ratio for both years, 2012 and 2011.
(2) comment on whether performance has gotten better or worse based on the ratio.
(3) provide a direct answer to the question.
Grading will be related to the “quality” of the answer. A simple “yes” or “no” will not yield a high grade.
Eventhough the questions deal with the same topic – treat each question as being separate.
Don’t use the data or information for one question on the others.
Insert rows between the questions to permit space for your answers.
Please insert rows rather than creating additional worksheets.
Henry Ford Health System • 2012 System Report
Note: Components of the financial statements attributable to Health Alliance Plan, the wholely owned HMO of the Henry Ford Health System are labeled (HAP)
CONSOLIDATED BALANCE SHEETS
December 31, 2012 and 2011 (In Thousands) 2012 2011
ASSETS
Current Assets:
Cash and cash equivalents 266,960 226,068
Cash and cash equivalents (HAP) 209,028 118,010
Short-term investments 16,211 14,261
Net Patient care receivables 174,534 195,592
Health care premium receivables (HAP) 43,020 50,479
Other current assets 208,312 175,351
Total Current Assets 918,065 779,761
LONG-TERM INVESTMENTS 343,112 460,767
ASSETS LIMITED AS TO USE 608,390 470,480
ASSETS LIMITED AS TO USE (HAP) 249,842 329,399
JOINT VENTURES AND OTHER ASSETS 116,726 100,628
PROPERTY, PLANT AND EQUIPMENT 2,815,104 2,628,995
(Accumulated Depreciation) (1,596,587) (1,467,043)
NET PROPERTY, PLANT AND EQUIPMENT 1,218,517 1,161,952
TOTAL ASSETS 3,454,652 3,302,987
LIABILITIES AND NET ASSETS
Current Liabilities 430,943 374,483
Current Liabilities (HAP) 270,435 259,328
Long-Term Debt 817,971 827,923
Other Long-Term Liabilities 497,828 481,157
TOTAL LIABILITIES 2,017,177 1,942,891
NET ASSETS 1,206,020 1,121,536
NET ASSETS (HAP) 231,455 238,560
TOTAL LIABILITIES AND NET ASSETS 3,454,652 3,302,987
CONSOLIDATED STATEMENT OF OPERATIONS
December 31, 2012 and 2011 (In Thousands) 2012 2011
UNRESTRICTED REVENUE
Patient service revenue 2,224,038 2,115,846
(Provision for uncompensated services) (158,729) (147,992)
Net patient service revenue 2,065,309 1,967,854
Health care premiums (HAP) 1,875,087 1,791,335
Investment income 66,150 26,186
Other income 456,943 189,051
Total Unrestricted Revenue 4,463,489 3,974,426
EXPENSES
Salaries, wages, and employee benefits 1,356,884 1,299,574
Salaries, wages, and employee benefits (HAP) 145,758 140,379
Healthcare provider expense (HAP) 1,380,862 1,398,888
Supplies and other expenses 1,036,860 693,106
Supplies and other expenses (HAP) 326,634 228,289
Depreciation and amortization 168,568 145,278
Total Expenses 4,415,566 3,905,514
EXCESS OF REVENUE OVER EXPENSES 26,090 45,133
EXCESS OF REVENUE OVER EXPENSES (HAP) 21,833 23,779
UNUSUAL ITEMS 7,425 (4,263)
EXCESS OF REVENUE OVER EXPENSES 55,348 64,649
2012 2011

  1. Calculating the Total Margin, separately for (a) Health Alliance Plan and (b) the Henry Ford Health System excluding Health Alliance Plan, does it appear that Henry Ford Health System has “the wherewithal to go it alone”?
    1
  2. Calculated Days Cash on Hand separately (a) using current asset accounts only and (b) including long-term investments and assets limited as to use, do you think that Henry Ford Health System has the liquidity to pay their bills?
  3. Based upon the Debt Ratio, do you think that Henry Ford would have the ability to borrow money if they need to make additional investments associated with the Affordable Care Act?
  4. Based upon the Average Age of Plant, do you think that they are keeping pace with technology?
  5. Based upon the Current Ratio, do you think that they are able to meet their short term obligations and do you foresee any liquidity issues?
  6. Calculate the Return on Assets, separately for (a) Health Alliance Plan and (b) the Henry Ford Health System excluding Health Alliance Plan, does it appear that Henry Ford Health System has “the wherewithal to go it alone”?

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