Question

Company A Company Company Consolidated Balance Sheets - USD ($) $ in Millions 2015 Consolidated Balance Sheets - USD ($) $in Millions 2015 Consolidated Balance Sheets - USD ($) $in Merions 2015 Assets Current assets: Cash and cash equivalents Short-term investments Accounts receivable, net $124 $0 1,601 $10,923 1,999 6,523 $356 $0 2,704 3:09 2,697 128 4,550 Assets Current assets: Cash and cash equivalents Short-term investments Accounts receivable, net of allowances of $333 and $260 Inventories? Prepaid expenses and other arrent assets Total arrent assets Long-term investments Property, plant and equipment, net of accumulated depreciation Other assets Total assets Liabilities Current fiabilities: Medical costs payable Current maturities of long-term debt 12,205 31,639 18,792 4,861 Assets Current assets: Cash and cash equivalents Short-term investments Accounts receivable, less allowance for doubtful accounts of $887 Inventories Prepaid expenses and other arrent assets Total aurrent assets Long-term investments Property, plant and equipment, net of accumulated depreciation Other assets Total assets Liabilities Current fabeties: Medical costs payable Current portion of long-term debt Inventories Prepaid expenses and other arrent assets Total arrent assets Long-term investments Property, plant and equipment, net of accumulated depreciation Other assets Total assets Liabilities Current tabuities: Medical costs payable Current maturities of long-term debt and lease financing obligations Accounts payable Accued salaries, wages and other arrent liabilities 1,802 5,171 1,175 7,915 2,255 4,472 11,277 56,091 111,383 9,421 23,682 14 330 6,634 127 11,994 1,543 1,427 Accounts payable Accrued salaries, wages and other arrent liabilities 1,390 2,801 9,940 Accounts payable Accued salaries, wages and other arrent liabilities Total arrent liabilities Long-term debt, net of arrent portion Lease financing obligations, less arrent maturities 2.997 Total arrent liabilities Long-term debt, less aurrent maturities Lease financing obligations, less arrent maturities Total aurrent liabilities Long-term debt, less arrent maturities Lease financing obligations, less arrent maturities 42,898 25,460 4,308 14,383 6,914 53 Other noncurrent liabilities Total liabilities Stockholders'equity: Total liabilities and stockholders' equity 732 $10,696 581 $11,277 Other noncurrent liabilities Total liabilities Stockholders'equity: Total liabilities and stockholders' equity 7,564 15,922 35,461 $ 111,383 Other long-term liabilities Total liabilities Shareholders' equily: Total liabilities and equity 1,767 $20,458 3,224 $23,682 Instructornotes: 1 it isn't likely Company Bhasnoassets in inventory. It ismore likely that inventory is quchasmall part of this companies assets that inventories were included inthe other assets account. Iadded several accounts to each set of financials to make themeasier to help standardizetheminan attempt to make themeasier to digest.

1. The next several questions require you to look at different ways of measuring the mix of assets each company holds.
   1. Which company (A, B or C) has the largest amount of inventory? What is the value of the inventory? A related and perhaps more telling question is, which company has the largest percentage of its total assets held in inventory?
   2. Which company (A, B or C) holds the greatest proportion of its total assets as facilities, equipment and other “fixed assets”?
   3. How many “days cash on hand” does each company (A, B and C) hold? (Note: for the “expenses” number in this calculation, include all accounts listed under “total revenue” on the companies’ income statements.)
2. Which company (A, B or C) has the largest investment income? How much was investment income as a percent of total revenue? What was the dollar amount?

3. What are the total margins for companies A, B and C?

4. Which company (A, B or C) has the greatest number of days in patient accounts receivable? Which has the fewest?

Answer 1

Solution:

1. Largest amount of inventory:

Company A has largest amount of inventory. The value of inventory is 2697 million USD. Company A has the largest percentage of its total assets held in inventory which is 23.92 %.

                Percentage of inventory held on total assets = Inventory / Total assets

2. Company C holds the greatest proportion of its total assets as facilities, equipment and other fixed assets. The total percentage of these assets is 73.20% of total assets it has.

Percentage of facilities, Equipment, and other fixed assets on total assets =

                                (Property plant and equipment, net of accumulated depreciation + Other assets) / Total assets

3. Days cash on hand :

Days cash on hand can be calculated by using the formula given below,

Days cash on hand = Cash and cash equivalent / ((operating expenses – depreciation) / 365 days)

                For company A,

To find the operating expenses add all terms that are listed below total revenues expect net profit.

Days cash on hand = 124 / ((30571 – 509) / 365)

                                = 124 / (30062/365)

                                = 124 / 82.36

                                = 1.5 days

                For Company B,

Days cash on hand = 10923 / ((151239 – 1693) / 365)

                     = 26.66 days

For company C,

Days cash on hand = 356 / ((18657 – 797) / 365)

                                = 7.27 days        

                               

Largest Investment Income :          

Company B has the largest investment income of 710 million USD.

Investment income as a percentage of total revenue = 710 / 157107 *100

                                                                                                        = 0.45%

Total Margins:

For Company A,

Total margin = net profit / Total revenue *100

                                = 166/30737 *100

                                = 0.54%

For company B,

Total margin = 5868/157107*100

                = 3.73%

For company C,

Total Margin = -76 / 18733 *100

                                = -0.405 %

Account Receivable days = Accounts receivable / Annual revenue * 365 days

Company C has greatest no. of days in patient accounts receivable which is 53 days.

Company B has the lowest no. of days in patient accounts receivable which is 15 days.