Introduction
Riverside Memorial Hospital is a unique medical center specializing in acute medical treatment and inpatient therapy. Riverside Hospital is a trusted US healthcare source, with a multidisciplinary team specializing in nephrology, Internal medicine, disease outbreaks, cardiology, and general surgery. Its main objective is to provide therapy at the highest level possible by combining sophisticated practice with a tailored plan of care to maximize patients’ results and help them reach their maximum potential. This paper aims to assess the financial condition of Riverside Memorial Hospital.
Profit Loss Statement
An income statement is a financial report that indicates a company’s revenue and expenses over a specific period. It also displays whether the organization yielded profit or suffered a loss throughout that period, hence the name (Deegan, 2022). The income statement, or P&L statement, is a financial statement that outlines the revenues, expenses, and additional costs during a specific period.
Top Revenue Items
Riverside Memorial Hospital’s income streams include patient care, premiums, and other revenues. Patient service revenues increased by 11.6% from $95,398 (of $102,565 total revenue) in 2017 to $106,502 of $112,050 in 2018 (Deegan, 2022). These revenues earned the most significant revenue relative to the other sources of income.
Cost Comparisons
Cost comparison refers to estimating the cost-of-service delivery of an economic business and relating it to the cost of private sector performance of the same activity. Riverside Memorial Hospital’s consolidated cash flow from operations was $5093.5 in 2017 and $8,121.7 in 2018 (Mesak & Sukartha, 2019). Over the two years, net cash flow has changed by 0.55%, indicating that the healthcare facility’s primary hospital operations are booming.
Riverside Memorial Hospital’s adjusted cash flow from investment operations was $5093.5 in 2017 and $6,293 in 2018. In 2018, net investing activities increased by 1.9% (Wookjae et al., 2020). Riverside Community Hospital’s increased capital expenditure suggests investing in future developments.
Interpretation of the Income Statement
Riverside has virtues but also financial flaws that must be addressed. Riverside Medical Center has an overspending problem, and by analyzing Riverside’s financial status, the hospital may improve its financial position. Riverside Memorial Hospital’s financial situation improved in 2018 compared to 2017.
The hospital’s total operating revenues increased by roughly 9.18%, from $102 565 to $112 050 (Wookjae et al., 2020).Significantly, the hospital’s costs went from $105,576 to $102,165, representing a 3.3% increase in overall expenses (Mesak & Sukartha, 2019).In essence, the Operating and Non-operating earnings grew from $8,572 to $2,395, representing a 258.0% rise in net income.
Balance Sheet Interpretation
Riverside Hospital’s total current assets were $28,815 in 2017 and $31,280 in 2018, a $2465 rise, or an 8.6% growth in the current hospital assets. Similarly, Net property and equipment were $119,835 in 2017 and $119,998 in 2018 (Mesak & Sukartha, 2019). The computation resulted in a modest rise of $163 in net assets, or a 0.14% gain. Riverside Memorial Hospital had total assets of $148,650 in 2017 and $151,278 in 2018. The above study indicates a $2628 increase in total assets, or a 1.77% increase in total assets (Deegan, 2022).
Riverside Memorial Hospital’s total current liabilities for the fiscal years ending 2017 and 2018 were $16,803 and $13,332, respectively. This amount represented a $3471 decrease in current liabilities or a 2.1% depreciation.Similarly, in 2017, total long-term liabilities were $33,055, but in 2018, they increased to $30,582 (Wookjae et al., 2020)—total long-term assets depreciated by $2473, or 7.5%. As a result, Riverside Community Hospital’s total liabilities and net assets were $148,650 in 2017 and $151,278 in 2018. Riverside Hospital’s total liabilities and net assets increased by $2628, or 1.8%.
Financial Ratios Calculations Review
Riverside Memorial Hospital had $28,815 in current assets in 2017 and $31,280 in 2018. In addition, the hospital had $16,803 in current liabilities in 2017 and $13,332 in 2018. The hospital’s current ratio (current assets/liabilities) for 2017 and 2018 was 1.7 and 2.3, respectively (Wookjae et al., 2020).
Riverside Memorial Hospital’s current ratio of 1.7 was relatively buoyant in 2017. It implied that the healthcare facility had sufficient cash to cover its bills, but only a little money locked up in current assets that might be reinvested or handed to shareholders. However, the current ratio in 2018, truncated to 2, was also excellent, indicating that the company had twice as many current assets as liabilities to meet its debts (Deegan, 2022). The hospital has twice as many current assets as liabilities to service them, signifying sufficient liquid assets to pay its short-term commitments.
Debt to Equity Ratio
The debt-to-equity ratio divides a corporation’s total liabilities by its shareholders’ equity. Total Liabilities / Shareholder Equity = DE Ratio. Notably, a company’s net assets are represented by its shareholders’ equity (Assets minus liabilities equal net assets). Riverside Memorial Hospital reported total assets of $148,650 in 2017 and $151,278 in 2018 (Wookjae et al., 2020).
Meanwhile, the Community healthcare institution’s total liabilities were $49,858 in 2017 and $43,914 in 2018. Depth-to-equity (DE) ratios were calculated as a result of the computations and yielded 0.5 in 2017 and 0.4 in 2018 (Asma, 2020). Nonetheless, the DE ratio of 0.4 previously attained by Riverside Memorial Hospital denoted that it was preferable from a risk standpoint.
Still, debt ratios of 0.6 or higher often render borrowing money more difficult (Bruno et al., 2019). Although a low debt-to-ratio indicates trustworthiness, a corporation is equally risky in holding too little debt. The DE ratio of 0.5 achieved in 2018 indicates that Riverside Hospital is a low-risk investment for creditors or prospective investors, with a debt-equity ratio of 0.5 (Asma, 2020). This ratio indicates that the healthcare institution has $1.00 in assets for every $0.50 in debt.
Working Capital Ratio
The working capital ratio displays the asset-to-liability ratio, or how often a corporation can settle its current liabilities with current assets. The ratio is calculated as follows: Working capital ratio=Current assets / current liabilities.
Riverside Memorial Hospital had assets of $28,815 in 2017 and $31,280 in 2018. Ideally, the Community healthcare institution recorded $16,803 in current liabilities in 2017 and $13,332 in 2018. The above computations yielded working capital ratios of 1.7 in 2017 and 2.3 in 2018 (Deegan, 2022). The working ratio of 1.7 achieved in 2017 demonstrates that the hospital can pay its creditors and debts within a year (Bruno et al., 2019).
However, the hospital’s working capital ratio must be managed. As a result, a ratio greater than two in 2018 was similarly unfavorable for the healthcare center. It indicated that the hospital had a lot of money not being used to develop the facility.
Nevertheless, the capital ratio is an indicator of liquidity, or the capacity of the hospital to make its payment commitments when they come due. The more significant ratio of 2:3 offered Riverside Community Hospital better operational freedom. Such a ratio denotes the welcoming circumstances of the hospital and adequate resources for expanding the healthcare facility (Bustani et al., 2022). Therefore, the 2:1 ratio gives Riverside Memorial Hospital great comfort.
Recommendation to Lease or Finance the Capital Item
Budgeting and forecasting expenditures are critical for successful healthcare institutions like Riverside Memorial Hospital. Unless the hospital chooses the correct equipment finance arrangement, the need for large equipment might rapidly limit its expansion potential. Unlike a long-term loan or acquiring the equipment outright, leasing allows Riverside Healthcare Facility to have the necessary equipment without a hefty upfront payment (Bustani et al., 2022). The hospital should save its cash flow resources for unanticipated expenses that may have a higher return on investment (ROI) (Asma, 2020). Establishing cash flow reserves will allow Riverside Memorial Hospital to accommodate large groups of new patients in a natural disaster or unanticipated crisis.
Conclusion
In conclusion, the financial situation of a healthcare institution is one of its most crucial qualities. Significantly, the financial health of a provider is critical to its management and stakeholders, including staff, the community, and investors (Bustani et al., 2022). The Riverside Memorial Hospital Organization has been experiencing financial challenges for some years.
The organization’s current liabilities surpassed its liquidity by approximately $6,179,870 (2019. $3,562,113) on March 31, 2020, signifying working capital shortfalls for those two years (Asma, 2020). However, as of March 31, 2021, the organization’s assets demonstrate a working capital gain. As a result, financing from the Health Ministry could be better, and the income balance is also vulnerable to the same risks. Riverside’s capacity to remain a going concern is contingent on its ability to generate sufficient cash flows.
References
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Deegan, C. (2022). Financial accounting theory. Cengage AU.
Mesak, D., & Sukartha, I. M. (2019). Financial Ratio Analysis in Predicting Financial Conditions Distress in Indonesia Stock Exchange. Russian Journal of Agricultural and Socio-Economic Sciences, 86(2), 155-165. Web.
Wookjae, H., Jae, M. L., Narang, P., John, E. G. (2020). Using Artificial Neural Network techniques to improve the description and prediction of household financial ratios. Journal of Behavioral and Experimental Finance, 25, 100273. Web.